- A strong recovery in USD demand prompted sales around the AUD / USD on Wednesday.
- A generally positive risk tone could help limit larger losses for the perceived riskier Aussie.
- The technical setup supports the outlook for a recovery from the recent downtrend path.
The AUD / USD pair struggled to capitalize on its weekly gains recorded over the past two trading sessions and fell slightly on Wednesday. The pair remained on the defensive near the mid-0.7200 at the start of the North American session and was little moved after the publication of durable goods orders in the United States.
The US dollar was in demand again following a sharp rise in yields on US Treasury bonds. In fact, the yield on the benchmark 10-year US government bond has risen back above the 1.30% threshold as the Fed is expected to start cutting back on its purchases further. assets in 2021.
That said, the underlying bullish tone in the markets acted as a tailwind for the perceived riskier Aussie and helped limit larger losses for the AUD / USD pair. Investors also appeared reluctant to place aggressive bets ahead of Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium.
Looking at the technical picture, the recent rebound from around 0.7100 or current year lows hit last Friday, stopped near resistance marked by the 50% Fibonacci level of the slip from 0.7427 to 0.7106. The mentioned barrier, around the 0.7265-70 region, should now serve as a pivot point for traders.
Meanwhile, the technical indicators on the daily chart have maintained their bearish bias. This, added to the fact that the oscillators on the hourly chart are about to fall back into negative territory, favors bearish traders and suggests that the rally has already run out of steam.
A subsequent drop below 38.2% Fibo. The level, around the 0.7225-20 region, will reaffirm the negative bias and cause some technical selling. AUD / USD could then accelerate the fall towards the 0.7180-75 area (Fibo level 23.6%) before aiming to challenge the 0.7100 figure.
On the other hand, the 0.7260-70 region could continue to act as a significant obstacle for the time being. Sustained strength beyond will be seen as a new trigger for bullish traders. The momentum could then push the AUD / USD pair further towards regaining the 0.7300 mark, or 61.8% Fibo. level.