AUD/USD Price Analysis: Corrective bounce could get sold into, 0.7000 mark holds the key

AUD/USD witnessed an intraday short-covering move from the fresh YTD low set earlier this Tuesday.
Retreating US bond yields, the risk-on impulse undermined the safe-haven USD and extended support.
The lack of any follow-through buying and acceptance below the 0.7000 mark favours bearish traders.

The AUD/USD pair staged a goodish recovery from its lowest level since June 2020 touched earlier this Tuesday and held on to its modest intraday gains through the early North American session. The pair was last seen trading around the 0.6970 region, up nearly 0.25% for the day.

The ongoing retracement slide in the US Treasury bond yields, along with the risk-on impulse, weighed on the safe-haven US dollar and benefitted the perceived riskier aussie. That said, any meaningful move up still seems elusive amid the prospects for a more aggressive policy tightening by the Fed, which should continue to act as a tailwind for the buck.

From a technical perspective, the overnight breakthrough the 0.7000 psychological mark and a subsequent slide below the previous YTD low, around the 0.6965 area, marked a fresh bearish breakpoint. Moreover, the AUD/USD pair's inability to capitalize on the intraday bounce suggests that a one-month-old bearish trend might still be far from being over.

The negative outlook is reinforced by the fact that technical indicators on the daily chart are holding deep in the bearish territory and are still far from being in the oversold zone. Hence, any further recovery might still be seen as a selling opportunity. That said, traders might refrain from placing fresh bets ahead of the US CPI report on Wednesday.

In the meantime, the 0.7000 mark now seems to act as an immediate resistance, above which a bout of short-covering could lift spot prices to the 0.7055-0.7060 horizontal zone. The latter should act as a strong barrier and cap the upside for the AUD/USD pair, at least for the time being.

On the flip side, immediate support is now pegged near the daily swing low, around the 0.6910 area. Some follow-through selling below the 0.6900 mark will reaffirm the near-term bearish bias and pave the way for additional losses. The AUD/USD pair might then accelerate the downward trajectory to the 0.6840-0.6835 intermediate support en-route the 0.6800 mark.

AUD/USD daily chart

Key levels to watch