AUD/USD: Bears looking to test Dec lows at 0.7500
- Technical setup points to further downside.
- A test of 0.7500 likely amid resurgent broad USD demand and higher USTs.
The bulls tightened their grip on the US dollar, knocking-off the AUD/USD pair to near 0.7565, the lowest levels seen so far this year.
The Aussie reversed yesterday’s temporary reversal and returned to the red zone in full force, as the US dollar jumpstarted its ongoing rally triggered by rising Treasury yields, with 10-year rates crawling back above the key 3 percent levels amid better US economic prospects and slowing demand for the US Treasuries.
Moreover, the risk-off sentiment seen on the global equities amid rising borrowing costs, in response to the Treasury yields rally, also collaborates to the downbeat tone around the higher-yielding currency while monetary policy divergence is back on investors’ minds amid increasing expectations of a June Fed rate hike.
Looking ahead, thin liquidity could exaggerate the moves in the pair while the light calendar is likely to leave the prices at the mercy of the USD dynamics.
AUD/USD levels to watch
Commerzbank’s Analyst, Karen Jones notes: “AUD/USD is under pressure following the erosion of major support at .7637/36, the 2016-2018 uptrend. Failure here targets initially the .7501 December 2017 low and ultimately the 2001-2018 uptrend at .7142. We notice the 13 count on the 240 minute chart and will attempt to sell a rally. The market recently saw a complete rejection of its 200-day ma at .7812 last week. This resistance is reinforced by the top of the channel at .7796 and the 38.2% retracement at .7831, all of which suggests that the market has topped at .7813.”