Bears flirt with 61.8% Fibo./ascending trend-line/50-DMA confluence

AUD/USD continued losing ground on Monday and dropped to over a one-month low.
Sustained USD buying and the risk-off mood weighed on the perceived riskier aussie.
The technical setup favours bearish traders and supports prospects for further losses.

The AUD/USD pair extended its recent sharp pullback from the 0.7660 area, or the highest level since June 2021 and witnessed some follow-through selling on Monday. This marked the fourth successive day of a negative move – also the eighth in the previous nine – and dragged spot prices to a one-month low, around mid-0.7300s.

The US dollar stood tall near its highest level since April 2020 and continued drawing support from expectations for a faster policy tightening by the Fed. Apart from this, a generally weaker tone around the equity markets further benefitted the greenback’s safe-haven status and weighed on the perceived riskier aussie.

From a technical perspective, Friday’s sustained break below the 0.7400-0.7390 support zone, or the 50% Fibonacci retracement level of the 0.7165-0.7662 rally was seen as a fresh trigger for bearish trades. The subsequent slide, however, stalled near an ascending trend-line extending from sub-0.7000 levels, or the YTD low touched in January.

The aforementioned support coincides with the 61.8% Fibo. level and the 50-day SMA, which, in turn, should now act as a pivotal point for short-term traders. Given that technical indicators on the daily chart have just started drifting into negative territory, a convincing break below will set the stage for additional losses.

The AUD/USD pair might then accelerate the downward trajectory towards the 0.7300 round-figure mark before eventually dropping to the next relevant support near the 0.7255-0.7250 region.

On the flip side, attempted recovery might now confront resistance near the 50% Fibo., around the 0.7400 mark. Sustained strength beyond could trigger a short-covering move and push the pair towards the 38.2% Fibo., around the 0.7470 region. Any further move up, however, is more likely to remain capped near the 0.7500 psychological mark.