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AUD/USD retreats after touching over a fresh five-month top during the Asian session on Monday.
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The cautious market mood underpins the safe-haven USD and weighs on the risk-sensitive Aussie.
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The technical setup favours bullish traders as the focus shifts to the RBA policy meeting on Tuesday.
The AUD/USD pair attracted some intra-day sellers around the 0.6700 mark, or the five-month high touched during the Asian session on Monday, before falling to a fresh daily low in the final hour. The spot price is currently trading near the 0.6660 area, down just 0.10% for the day, and the downside is sponsored by a moderate US dollar (USD) uptick.
Investors have become cautious as tensions in the Middle East escalate and fears of another outbreak of a respiratory disease similar to the Covid-19 in China have curbed recent gains in global equity markets. This, in turn, is seen to lend some support to the safe-haven greenback and weaken the risk-sensitive Australian dollar (AUD). Apart from this, some retracement trades exerted downward pressure on the AUD/USD pair ahead of the Reserve Bank of Australia (RBA) policy meeting on Tuesday.
From a technical perspective, the recent sustained move above the all-important 200-day Simple Moving Average (SMA) and Friday’s close above the 61.8% Fibonacci retracement level of the July-October decline was seen as a fresh trigger for bullish traders. Furthermore, the oscillators on the daily chart are comfortably in positive territory and are still far from being in overbought territory. This suggests that the path of least resistance for the AUD/USD pair is a reversal in dovish Federal Reserve (Fed) expectations.
Meanwhile, any further decline could find support near the 0.6600 mark ahead of last week’s swing low, around the 0.6570-0.6565 region. Some follow-through selling, however, could drag the AUD/USD pair further towards the 0.6530 intermediate support en route to the 0.6500 psychological mark. This is followed by the 100-day SMA, around the 0.6475-0.6470 zone, and the 0.6430 area, or the 50-day SMA. Failure to defend the said supports might negate the positive outlook and shift the near-term bias in favour of bearish traders.
On the flip side, the multi-month peak, or levels just ahead of the 0.6700 round figure, now becomes an immediate hurdle. Bulls might wait for sustained strength beyond the said barrier before placing fresh bets. The AUD/USD pair might then climb to the next relevant hurdle near the 0.6740 region before aiming to reclaim the 0.6800 mark. The momentum could get extended further towards the July monthly swing high, around the 0.6895 region, with some intermediate resistance near the 0.6845-0.6850 region.
AUD/USD daily chart
Technical levels to watch
AUD/USD
