AUD/USD retreats from two-month tops, back below 0.78 handle

Haresh Menghani FXStreet

• Surging US bond yields prompt some profit-taking at higher levels.
• USD weakness/bullish copper prices to limit any deeper correction.
• Second-tier US economic data might provide short-term opportunities.

The AUD/USD pair trimmed some of its early strong gains to two-month tops and retreated over 25-pips from levels beyond the 0.78 handle.

A goodish rebound in the US Treasury bond yields seems to be the only factors prompting traders to take some profits off higher-yielding currencies - like the Aussie, especially after the pair's recent upsurge of over 150-pips over the past five trading session.

Despite a modest retracement, the pair so far has held in the positive territory, around 100-day SMA, and was being supported by prevailing bearish sentiment surrounding the US Dollar.

Moreover, the bullish run-up in copper prices might continue to underpin demand for the commodity-linked Australian Dollar and help limit any deeper corrective slide, at least for the time being.

Traders now look forward to the US economic docket, featuring the release of weekly initial jobless claims, goods trade balance data and Chicago PMI, in order to grab some short-term opportunities.

Technical levels to watch

A follow-through retracement below 0.7770 level (session low) could get extended towards 0.7730 intermediate support before the pair eventually drops to retest the very important 200-day SMA support near the 0.7700-0.7695 region.

On the upside, sustained move back above the 0.7800 handle now seems to pave the way for an extension of the pair's bullish trajectory towards 0.7845-50 supply zone ahead of 0.7880 level and the 0.7900 handle.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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