AUD/USD retreats sharply from one-week high, bears flirt with 0.7100 mark

The AUD/USD pair quickly retreated over 50 pips during the early North American session and refreshed daily lows, around the 0.7100 mark in the last hour.

Having found some support near the 0.7100 round-figure mark, the pair regained some positive traction and build on this week's recovery move from the 0.7020 region, or four-week lows touched on Tuesday. The uptick was exclusively sponsored by the emergence of some fresh selling around the US dollar.

The positive news of the first approved treatment for the highly contagious coronavirus disease boosted investors' confidence and undermined the greenback's safe-haven demand. The greenback was further pressured by speculations of a strong Democratic victory in the upcoming US elections.

The intraday positive momentum pushed the AUD/USD pair to fresh one-week highs, around the 0.7155-60, albeit dovish RBA expectations kept a lid on any further gains. Investors remain convinced that the RBA will cut rates in November, which, in turn, prompted some fresh selling at higher levels.

Meanwhile, the latest leg of a sudden drop lacked any obvious catalyst and could be attributed to a modest USD rebound following the release of US PMI prints. In fact, the flash version of the Markit US Manufacturing PMI edged higher to 53.3 in October from 53.2 previous, while the gauge for the services sector surpassed market expectations and jumped to 56 during the reported month.

Apart from this, the underlying cautious mood around the equity markets further drove flows away from the perceived riskier Australian dollar and contributed to the intraday pullback. It will now be interesting to see if the AUD/USD pair is able to find any support at lower levels or a convincing break below the 0.7100 mark sets the stage for a slide back towards challenging the key 0.7000 psychological mark.

Technical levels to watch