- AUD/USD extended its recent pullback from yearly highs and fell to a near three-week low.
- The acceptance below 0.7500 and the subsequent drop has changed the bias in favor of bearish traders.
- Attempted recovery moves could attract fresh selling and remain capped near the 0.7535-40 area.
The AUD/USD pair extended this week’s sharp retracement decline from highs (levels just above 0.7650) and witnessed some selling for the third day in a row on Friday. The downward trajectory dragged cash prices to a 2 1/2 week low around the 0.7440-0.7435 region during the early American session.
The more aggressive FOMC Minutes, coupled with the continued rise in US Treasury yields, pushed the US dollar to its highest level since May 2020. This, in turn, was seen as a factor. key that put downward pressure on the AUD/USD pair. Bulls seemed unimpressed by a positive risk-on tone, which tends to benefit the Aussie perceived as riskier.
The ongoing decline suggests that Tuesday’s strong post-RBA move beyond an ascending channel extending from the yearly low was a false breakout. Some follow-through selling below 0.7500 may have already changed the bias in favor of bearish traders. A subsequent break through the 0.7450 horizontal support zone reaffirms the negative outlook.
Therefore, the corrective pullback looks more likely to extend towards the 0.7400 round mark before the AUD/USD pair eventually drops to the 0.7375-0.7370 area. The next relevant support is tied near the 0.7300 confluence region, which comprises the very important 200-day SMA and the lower bound of the aforementioned trend channel.
On the other hand, the 0.7500 mark now seems to act as a strong immediate resistance. Any further recovery could attract fresh selling and remain capped near the 0.7535-0.7545 area. Sustained strength beyond that should allow the AUD/USD pair to reclaim the 0.7600 level, which coincides with channel resistance and acts as a turning point.
AUD/USD daily chart
Technical levels
Source: Fx Street
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