The AUD/USD pair extended its recent sharp pullback from the 0.7280-0.7285 region, or the monthly peak and witnessed selling for the fourth successive day on Monday. This also marked the sixth day of a negative move in the previous seven and dragged spot prices to over a three-week low, just below the 0.7000 psychological mark during the early part of the European session.
The US dollar continued drawing support from firming expectations that the Fed would need to tighten its policy at a faster pace to curb soaring inflation. Apart from this, the prevalent risk-off mood was seen as another factor that underpinned the safe-haven greenback, which further weighed on the risk-sensitive aussie and contributed to the AUD/USD pair's downfall.
From a technical perspective, a break below the 0.7000 handle, which coincided with the 61.8% Fibonacci retracement level of the recent recovery from the YTD low, could be seen as a fresh trigger for bears. Moreover, technical indicators on the daily chart have been drifting lower in the negative territory and add credence to the near-term bearish outlook for the AUD/USD pair.
Hence, a subsequent slide towards testing the next relevant support, near the 0.6950-0.6945 region, now looks like a distinct possibility. Some follow-through selling has the potential to drag the AUD/USD pair towards intermediate support near the 0.6915-0.6910 area en-route the 0.6855-0.6850 zone and the YTD low, around the 0.6830-0.6825 region touched on May 12.
On the flip side, the 0.7030 zone now seems to act as an immediate resistance ahead of the 50% Fibo. level, around mid-0.7000s. Sustained strength beyond could trigger a short-covering bounce towards the 0.7100 round figure. The latter marks the 38.2% Fibo. level, which if cleared decisively will negate any near-term bearish bias and pave the way for additional gains.
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