AUD/USD Price Analysis: Intraday recovery falters near mid-0.6500s despite weaker USD

The AUD/USD pair reverses its intraday losses led by the Reserve Bank of Australia's less-than-expected 25 bps rate hike and climbs to over a one-week high during the early part of the European session. The intraday uptick, however, lacks follow-through buying and stalls just ahead of the mid-0.6500s.

The US dollar prolongs its recent sharp corrective pullback from a two-decade high touched last week amid a further slide in the US Treasury bond yields. Apart from this, the risk-on impulse is further weighing on the safe-haven greenback and driving flows towards the risk-sensitive aussie.

Looking at the broader picture, the AUD/USD pair has been oscillating in a narrow trading band over the past week or so. The range-bound price action constitutes the formation of a rectangle on intraday charts and points to indecision among traders over the next leg of a directional move.

Against the backdrop of a sharp fall from the August monthly swing high, the formation might still be categorized as a bearish consolidation phase. Furthermore, technical indicators on the daily chart - though have been recovering from lower levels - are still holding in the bearish territory.

This, in turn, suggests that the path of least resistance for the AUD/USD pair is to the downside and warrants caution for bullish traders. That said, some follow-through buying will negate the bearish bias and set the stage for some meaningful appreciating move in the near term.

The AUD/USD pair might then build on its recent bounce from its lowest level since April 2020 and aim to reclaim the 0.6600 round-figure mark. This is followed by the 0.6620-0.6625 resistance zone, above which a fresh bout of a short-covering move could lift spot prices to the 0.6700 mark.

On the flip side, the post-RBA low, around mid-0.6400s, now seems to protect the immediate downside ahead of the 0.6400 round figure. A convincing break below will make the AUD/USD pair vulnerable to weakening further below the YTD low, around the 0.6365-0.6360 area and test the 0.6300 mark.

AUD/USD 4-hour chart

Key levels to watch