- AUD/USD once again started retreating from the vicinity of the 0.7400 mark.
- The set-up favours bearish traders and supports prospects for further losses.
The AUD/USD pair maintained its offered tone through the first half of the European session, albeit has managed to rebound few pips from daily lows. The pair was last seen trading just above mid-0.7300s, still down nearly 0.35% for the day.
Worries about the potential economic fallout from the fast-spreading Delta variant of the coronavirus took its toll on the global risk sentiment. This was evident from a sharp pullback in the equity markets, which benefitted the safe-haven US dollar and drove flows away from the perceived riskier aussie.
Looking at the technical picture, the AUD/USD pair has been oscillating in a narrow over the past four trading sessions, forming a rectangle on hourly charts. Given the recent decline, this might be categorized as a bearish continuation pattern and supports prospects for a further near-term depreciating move.
The negative outlook is reinforced by the fact that technical indicators on the daily chart are holding deep in the bearish territory. Apart from this, the emergence of fresh selling at higher levels and repeated failures near the 0.7400 mark further suggests that the near-term selling bias is still far from over.
Hence, a subsequent slide back towards the 0.7300 mark, en-route YTD lows, around the 0.7290-85 region, remains a distinct possibility. Some follow-through selling should pave the way for a slide towards the 0.7230-25 intermediate support before the AUD/USD pair eventually drops to test the 0.7200 round figure.
On the flip side, the 0.7395-0.7400 area might continue to act as immediate strong resistance. A convincing break through the trading range resistance might trigger a short-covering move and lift the AUD/USD pair further beyond the 0.7425-30 hurdle, towards the 0.7475-80 supply zone and the key 0.7500 psychological mark.
AUD/USD 1-hour chart
Technical levels to watch
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