AUD/USD: 200 DMA remains a tough nut to crack amid cautious mood

AUD/USD Price Analysis: Stays defensive but a falling wedge, targets a rally toward 0.7000

  • AUD/USD fails to capitalize on the early upside amid a souring mood.
  • Falling Treasury yields cap USD recovery, offering aussie some support.
  • Acceptance above 200 DMA is critical for AUD bulls after recent gains.

AUD/USD is defending minor bids just above 0.7100, helped by a pause in the US dollar recovery ahead of the Consumer Sentiment data.

Risk sentiment remains in a weaker spot amid fresh covid concerns in China, hawkish Fed commentary and looming recession risks. The risk-off flows revive the demand for the safe-haven US government bonds, which trigger a sell-off in the Treasury yields, in turn, acting as a drag on the American dollar.

Reuters reported that Shanghai recorded a single coronavirus case on Friday while several towns and cities are already under lockdowns over the past week. Renewed China’s covid lockdowns concerns re-ignite growth fears, adding to the sour market mood.

Meanwhile, the hawkish comments from Fed policymakers continue to suggest that the US central bank will continue with its rate hike plan to curb inflation, as a one-time softening in the US CPI and PPI figures is not enough to dissuade the Fed’s commitment to fighting inflation.

Aggressive Fed tightening expectations also sap investors’ confidence in riskier assets such as equities, aussie dollar etc. Markets now await the US Preliminary Michigan Consumer Sentiment data for fresh trading opportunities in the pair.

Technically, AUD/USD has eased after running into the critical flattish 200-Daily Moving Average (DMA) resistance at 0.7121.

Acceptance above the latter is needed to extend the ongoing recovery towards 0.7150, the psychological barrier.

The 14-day Relative Strength Index (RSI) is trading flat above the midline, keeping buyers hopeful. The 21 DMA is set to cut the 100 DMA for the upside, adding credence to the upside in the spot.

However, rejection once again at the 200 DMA will prompt the aussie to revisit the daily lows of 0.7088, below which the 0.7050 level will come into play.

AUD/USD: Daily chart

AUD/USD: Additional levels to consider


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