AUD/USD Price Analysis: Remains vulnerable, bears might aim to test 0.6800 mark

• AUD/USD prolonged its recent slump and dived to a near two-year low on Thursday.
• Retreating US bond yields capped the USD and assisted the pair to find some support.
• The set-up still favours bearish traders and supports prospects for additional losses.

The AUD/USD pair has managed to rebound a few pips from its lowest level since June 2020 and was last seen trading around the 0.6875-0.6880 region, still down 0.90% for the day.

The US dollar trimmed a part of its intraday gains to a nearly two-decade high amid an extension of the recent sharp pullback in the US Treasury bond yields. This, in turn, assisted the AUD/USD pair to find some support near the mid-0.6800s, though any meaningful recovery still seems elusive.

Wednesday's higher-than-expected US consumer inflation figures reaffirmed bets for a more aggressive policy tightening by the Fed. This, along with recession fears, continued weighing on investors' sentiment, which should act as a tailwind for the safe-haven buck and cap the AUD/USD pair.

From a technical perspective, the overnight sharp pullback from the 0.7055-0.7060 region and subsequent weakness below the previous YTD low, around the 0.6910 area marked a fresh bearish breakdown. The latter should now act as a strong barrier and cap the AUD/USD pair's attempted recovery.

Any further move up might continue to face still resistance and met with a fresh supply near the 0.7000 psychological mark. This should act as a key pivotal point for short-term traders, which if cleared decisively might trigger a short-covering bounce back towards the 0.7055-0.7060 area.

On the flip side, the daily swing low, around mid-0.6800s, now seems to protect the immediate downside. Some follow-through selling will reaffirm the bearish outlook and make the AUD/USD pair vulnerable to prolonging the downward trajectory to test the next relevant support near the 0.6800 mark.

AUD/USD daily chart

Key levels to watch