AUD/USD drops to near two-week low, bears now await break below mid-0.7400s

• AUD/USD turned lower for the third straight day amid sustained USD buying interest.
• The Fed’s hawkish outlook, elevated US bond yields continued underpinning the buck.
• Sustained break below the mid-0.7400s will set the stage for further near-term losses.

The USD attracted fresh buying during the early European session and dragged the AUD/USD pair to a near two-week low, around the 0.7460 region in the last hour.

Following a brief consolidation through the first half of the trading on Friday, the AUD/USD pair met with a fresh supply and drifted into negative territory for the third successive day. The Fed's hawkish outlook pushed the US dollar to its highest level since May 2020, which, in turn, was seen as a key factor exerting downward pressure on spot prices.

It is worth recalling that the March FOMC minutes released on Wednesday showed that policymakers were prepared to hike interest rates by 50 bps at upcoming meetings. Moreover, there was a general agreement about reducing the Fed's massive balance sheet as soon as next month. This, along with elevated US Treasury bond yields, continued underpinning the buck.

The prospect for a more aggressive policy tightening by the Fed comes amid worries that the recent surge in commodity prices would further push consumer inflation higher. The combination of factors assisted the US bond yields to hold steady near the multi-year peaks, which favours the USD bulls and has set the stage for further losses for the AUD/USD pair.

Even from a technical perspective, acceptance below the 0.7500 psychological mark and a subsequent breakthrough mid-0.7400s will suggest that the AUD/USD pair has topped out in the near term. The corrective pullback could then drag spot prices to the 0.7400 round-figure mark en-route the next relevant support near the 0.7375-0.7370 region.

Technical levels to watch