Recovers from three-week lows, upside seems limited

  • Oversold RSI on hourly charts assisted AUD/USD to rebound from descending channel support.
  • Hawkish Fed expectations, the risk-off impulse underpinned the USD and might cap the upside.
  • Any further recovery might confront stiff resistance near the 0.7300 mark and remain capped.

The AUD/USD pair managed to recover its intraday losses and climbed back closer to daily tops, around the 0.7360 region during the early North American session. Extremely oversold RSI on hourly charts assisted the pair to find decent support near the lower boundary of a near two-week-old descending trend channel.

However, the prevalent strong bullish sentiment surrounding the US dollar – amid expectations for an imminent Fed taper announcement – might continue to act as a headwind for the AUD/USD pair. Apart from this, the risk-off impulse in the markets might further collaborate to cap gains for the perceived riskier aussie.

Even from a technical perspective, last week’s sustained break below the 0.7300 mark was seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart have been gaining negative traction and are still far from being in the oversold territory, warranting some caution before positioning for any further recovery.

Hence, any subsequent move up might still be seen as a selling opportunity near the 0.7300 mark. This, in turn, should cap the AUD/USD pair near the trend-channel resistance, currently near the 0.7315 region. The latter should act as a key pivotal point for short-term traders, which if cleared will negate the negative bias.

On the flip side, the daily swing lows, around the 0.7220 area, now seems to have emerged as immediate support. Some follow-through selling will mark a fresh bearish breakdown and turn the AUD/USD pair vulnerable. The next relevant support is pegged near the 0.7100 round figure, or YTD lows touched on August 20.

AUD/USD 4-hour chart

fxsoriginal

Technical levels to watch

 

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