Yesterday (24 Feb, spot at 0.7220), we highlighted that ‘the risk of a short-term top has increased’. We added, ‘a break of 0.7175 would indicate that the week-long upward pressure has dissipated’. While our view for a short-term top was not wrong, we did not anticipate the price actions where AUD plummeted to 0.7095 and the subsequent sharp rebound. The rapid drop appears to be overdone but there is chance for AUD to test the major support at 0.7050 before a more sustained recovery can be expected. On the upside, a break of 0.7230 (‘strong resistance’ level) would indicate that 0.7050 is not coming into the picture.

AUD/USD pokes 0.7200 while paring the biggest daily fall in a month during early Friday morning in Europe.

The quote dropped to the lowest levels in a week the previous day before bouncing off a 10-week-old horizontal support zone, around 0.7087-92.

In doing so, the AUD/USD prices battle the previous support line from late January, around 0.7200, by keeping the latest U-turn from the 21-DMA.

It should be noted, however, the receding bullish bias of the MACD joins the pair’s repeated failures to cross the 100-DMA level surrounding 0.7240 to keep AUD/USD buyers hopeful.

Meanwhile, a daily closing below the 21-DMA level of 0.7150 will direct bears towards the aforementioned horizontal area near 0.7092-87 before highlighting the 0.7000 threshold for the AUD/USD sellers.

Though, AUD/USD pair’s weakness past-0.7000 will be tough as December 2021 low near 0.6990 and January’s low of 0.6966 will be tough nuts for pair bears to crack afterward.

Betting on Bearish Momentum Below 0.7300

Feb 27 2022