AUD/USD attracted some dip-buying on Monday near the 0.7335 confluence support.
Hawkish Fed expectations acted as a tailwind for the USD and might cap the upside.
Mixed technical indicators further warrant some caution before placing bullish bets.
The AUD/USD pair recovered over 30 pips from one-and-half-week lows touched earlier this Monday and refreshed daily tops heading into the North American session. The pair was last seen trading around the 0.7365-70 area, up over 0.10% for the day.
The prevalent risk-on environment – as depicted by a strong rally in the US equity futures – was seen as a key factor that extended some support to the perceived riskier aussie. The uptick, however, lacked bullish conviction amid a broad-based US dollar strength, buoyed by expectations for an imminent Fed taper announcement.
From a technical perspective, the AUD/USD pair stalled its recent pullback from the highest level since mid-July near the 38.2% Fibonacci level of the 0.7106-0.7478 strong rally. This coincides with the 200-period SMA on the 4-hour chart and should now act as a key pivotal point amid absent relevant market moving economic releases.
Meanwhile, technical indicators on the daily chart are holding in the positive territory but have been struggling to gain any meaningful traction. Moreover, oscillators on the 4-hour chart are yet to recover fully from the bearish territory, warranting some caution for bullish traders and positioning for any further gains.
Hence, any subsequent move up is more likely to confront stiff resistance near the 23.6% Fibo. level, around the 0.7385-90 region. This is closely followed by the 0.7400 mark, which if cleared decisively would set the stage for a move beyond mid-0.7400s, towards retesting monthly swing highs, around the 0.7475-80 region.
On the flip side, the 0.7335 confluence support should continue to protect the immediate downside. Some follow-through selling has the potential to drag the pair further towards testing sub-0.7300 levels, or the 50% Fibo. level. Failure to defend the mentioned support levels might be seen as a fresh trigger for bearish traders.
The AUD/USD pair might then accelerate the slide towards mid-0.7200s, en-route the 0.7230-25 support before eventually dropping to the 0.7200 round-figure mark. The downward trajectory could further get extended towards the 0.7170-65 horizontal support, below which bears are likely to aim to retest YTD lows, around the 0.7100 mark.