AUD/USD drops to 0.7700 neighbourhood, reverses the overnight positive move

The AUD/USD pair maintained its offered tone through the early European session and drooped to fresh daily lows, around the 0.7720-55 region in the last hour.

The pair met with some fresh supply on Tuesday and eroded a major part of the previous day's goodish rebound of over 60 pips from the vicinity of the 0.7700 mark. The US dollar managed to regain positive traction amid speculations that the incoming positive US economic data may force the Fed to raise interest rates sooner than later. This, in turn, was seen as a key factor that prompted some fresh selling around the AUD/USD pair.

The Australian dollar was further pressured by softer domestic data, which showed that Australia's trade surplus narrowed to A$5.574 billion in March. This represents a more than A$2 billion fall from February's surplus of A$7.60 billion and was well short of market expectations. Adding to this, the Reserve Bank of Australia (RBA) maintained its dovish outlook and contributed to the intraday selling surrounding the AUD/USD pair.

At its monthly board meeting held this Tuesday, the RBA decided to maintain its current monetary policy settings and left the official cash rate unchanged at a record low level of 0.10%. The accompanying rate statement revealed that the Australian central bank remains committed to keeping interest rates near zero until inflation is sustainably within the 2-3% target band, which they do not expect to meet until at least 2024.

From a technical perspective, the emergence of some fresh selling on Tuesday validates the formation of a multiple-tops pattern near the 0.7815-20 supply zone. That said, the bearish reversal pattern is not complete until strong support is broken decisively. This makes it prudent to wait for some strong follow-through selling below the 0.7700-0.7690 region before traders start positioning for any further near-term depreciating move.

Technical levels to watch