- AUD/USD off lows around 0.7350, but not out of the woods yet.
- Bears are testing the bullish commitments at critical daily support.
- Escalating covid concerns remain a drop, with all eyes on the RBA decision.
AUD/USD has bounced back above 0.7350, tracking the rally in the S&P 500 futures amid a recovery in the risk appetite.
Expectations of more monetary stimulus support likely from China combined with the progress on the US infrastructure bill boost the market mood, weighing negatively on the safe-haven US dollar.
Despite the rebound in the aussie, its bearish potential appears intact amid surging covid cases in Australia and extension of the lockdowns across the country. Traders also remain on the back foot ahead of the US ISM Manufacturing PMI and Reserve Bank of Australia’s (RBA) monetary policy decision.
As observed on AUD/USD’s daily chart, the aussie is testing the critical rising trendline support at 0.7330.
A daily closing below the latter could validate a bear flag formation, with a sell-off towards 0.7200 likely on the cards. Ahead of that the spot could test the 0.7300 level.
The 14-day Relative Strength Index (RSI) remains below the midline, allowing room for more declines.
AUD/USD: Daily chart
Meanwhile, any recovery attempts could face stiff resistance around 0.7420, where the bearish 21-Daily Moving Average (DMA) and rising trendline hurdle intersect.
A sustained break above the latter could negate the bearish momentum in the near term.