AUD/USD Price Analysis: Trades with modest intraday losses, bullish potential intact

• AUD/USD drifts lower for the second straight day, though the downside remains limited.
• The fundamental backdrop supports prospects for a further near-term appreciating move.
• A slightly overbought RSI is holding back bulls from placing fresh bets and capping gains.

The AUD/USD pair attracts some dip-buying on the first day of a new week and stalls its pullback from the 0.6900 mark, or the highest level since February 2023 touched on Friday. Spot prices, however, remain in the negative territory for the second straight day and trade around the 0.6865 region during the early European session.

The Federal Reserve's (Fed) hawkish outlook, signalling that borrowing costs may still need to rise by as much as 50 bps by the end of this year, assists the US Dollar (USD) to gain some positive traction on Monday. Apart from this, a generally softer risk tone, amid worries about a global economic downturn, particularly in China, further benefits the safe-haven buck and weighs on the risk-sensitive Aussie. That said, the Reserve Bank of Australia's (RBA) surprise 25 bps rate hike and a more hawkish policy statement, act as a tailwind for the Australian Dollar and help limit losses for the AUD/USD pair.

From a technical perspective, last week's breakout through the 100-day Simple Moving Average (SMA) and a subsequent move beyond the 0.6800 round-figure mark was seen as a fresh trigger for bulls. That said, the Relative Strength Index (RSI) on the daily chart is hovering around the 70 mark and holding back traders from placing fresh bullish bets around the AUD/USD pair. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices is to the downside and any corrective decline might attract fresh buyers near the 0.6800 resistance breakpoint.

That said, a sustained break below the latter might prompt some technical selling and drag the AUD/USD pair back towards the 100-day SMA, currently pegged around the 0.6725 region. The said area should act as a key pivotal point and a strong near-term base for spot prices, which if broken should pave the way for deeper losses.

On the flip side, the 0.6900 round-figure mark now seems to have emerged as an immediate hurdle. Some follow-through buying has the potential to lift the AUD/USD pair further towards the 0.6955-0.6960 region, above which bulls might aim to conquer the 0.7000 psychological mark for the first time since February 14.

AUD/USD daily chart

Key levels to watch