During Friday’s early European session, the AUD/USD pair encountered renewed selling pressure, extending its decline following weaker-than-expected Chinese trade data. Despite touching a fresh daily low, the pair managed to hold above the psychological support level of 0.6500 and staged a modest rebound in recent trading.
However, meaningful recovery remains elusive as the US Dollar (USD) continues to garner strength, fueled by expectations of prolonged higher interest rates by the Federal Reserve (Fed) amidst persistent US inflation concerns. Additionally, ongoing geopolitical tensions in the Middle East bolster the appeal of the safe-haven Greenback, further restraining the risk-sensitive Australian Dollar.
From a technical standpoint, the AUD/USD pair’s ability to defend the 0.6500 level is crucial, serving as a pivotal point. With oscillators on the daily chart signaling negative momentum, a decisive break below this level would trigger fresh bearish sentiment, potentially extending the recent pullback from the 0.6645 area, a one-month high reached earlier this week.
Further downside movement below the 0.6480 area, corresponding to the monthly low, would confirm the bearish bias, paving the way for a challenge of the year-to-date trough around the 0.6445-0.6440 region established in February. Subsequently, the pair could target the 0.6400 level before testing support near the 0.6355-0.6350 zone.
Conversely, any attempt at recovery is likely to encounter strong resistance near the 0.6545-0.6555 region, aligning with the crucial 200-day Simple Moving Average (SMA). This resistance is followed by the 100-day SMA near the 0.6600 mark. A breakthrough above these levels could prompt short-covering, potentially lifting the AUD/USD pair back towards the 0.6640-0.6645 area, the monthly swing high.
