• Stronger Australian CPI figures assisted AUD/USD to gain some traction during the Asian session.
  • The risk-off mood, rebounding US bond yields underpinned the safe-haven USD and capped gains.
  • The technical set-up favours bearish traders and supports prospects for additional near-term losses.

The AUD/USD pair witnessed heavy selling for the second successive day on Monday and dropped to over a one-month low, though showed some resilience below the 0.7100 mark. The US dollar made a solid comeback on the first day of a new week and continued drawing support from growing acceptance that the Fed will tighten its policy at a faster pace than anticipated. Apart from this, rising geopolitical risk over Ukraine further benefitted the greenback's safe-haven status and drove flows away from the perceived riskier aussie.

That said, a strong late rebound in the US equity markets kept a lid on any additional gains for the buck and assisted the pair to bounce over 50 pips from the daily low. The recovery momentum extended through the early part of the Asian session on Tuesday and was further fueled by hotter-than-expected Australian consumer inflation figures. In fact, the headline CPI rose 1.3% during the fourth quarter, pushing the yearly rate to 3.5%.

Adding to this, the core CPI surpassed the midpoint of the Reserve Bank of Australia's 2-3% target for the first time since June 2014 and lifted expectations for an earlier interest rate hike. This, in turn, provided a goodish lift to the major, though the momentum ran out of steam near the 0.7175 region. The risk-off mood, along with rebounding US Treasury bond yields, acted as a tailwind for the buck and attracted fresh selling around the major.

Market participants now look forward to the release of the Conference Board's US Consumer Confidence Index for a fresh impetus later during the early North American session. This, along with the US bond yields and the broader market risk sentiment, will influence the USD and produce some trading opportunities. The focus, however, will remain on the outcome of a two-day FOMC policy meeting, scheduled to be announced on Wednesday.

Technical outlook

From a technical perspective, the overnight slide validated last week’s bearish break below ascending trend-channel support extending from the 2021 low. Moreover, the emergence of fresh selling at higher levels favours bearish traders and supports prospects for an extension of the recent rejection slide from the 100-day SMA resistance. Sustained weakness below the 0.7100 mark will reaffirm the negative bias and turn the pair vulnerable to test the 0.7060-0.7050 intermediate support. The downward trajectory could eventually drag spot prices back towards challenging the key 0.7000 psychological mark.

On the flip side, the daily swing high, around the 0.7175 region, nears the ascending channel support breakpoint and should now act as immediate strong resistance. This is closely followed by the 0.7200 mark, above which the pair could test the 0.7225 supply zone. Some follow-through buying will negate the bearish outlook and allow bulls to make a fresh attempt to clear the 100-day SMA barrier, currently around the 0.7270 region. The next relevant hurdle is pegged near the 0.7300 mark ahead of the monthly high, around the 0.7315 region touched on January 13.


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content

Recommended Content

Editors’ Picks

EUR/USD steadies near 1.0550, looks to post modest weekly gains

EUR/USD steadies near 1.0550, looks to post modest weekly gains

EUR/USD has lost its bullish momentum after having climbed above 1.0570 with the initial reaction to the US data in the American session and retreated toward the mid-1.0500s. On a weekly basis, the pair remains on track to close in positive territory. 


GBP/USD struggles to hold above 1.2300

GBP/USD struggles to hold above 1.2300

GBP/USD has edged lower following a jump above 1.2300 in the early American session on Friday. The market mood remains upbeat ahead of the weekend with Wall Street's main indexes posting strong daily gains on upbeat US data. 


Gold stays below $1,830 as US yields edge higher

Gold stays below $1,830 as US yields edge higher

Gold continues to fluctuate below $1,830 on Friday and looks to close the second straight week in negative territory. Fueled by the risk-positive market environment, the benchmark 10-year US Treasury bond yield is up more than 1% on the day, limiting XAU/USD's upside.

Gold News

Why Cardano could surprise over the weekend

Why Cardano could surprise over the weekend

ADA  set to close out the week with a gain on the workday trading week and over the weekend? Central banks signaled that the rate hike cycle is ending, meaning less stress and tight conditions for trading, opening up room for some upside potential with Cardano set to pop above $0.55 and test a significant cap.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!