AUD/USD retreats from monthly tops around the 50-DMA as bears eye 0.7200

• The Australian dollar sheds some of Monday gains, down 0.21%.
• Federal Funds Rates expectations increased to near 60%, as investors priced in a 25 basis points hike for the March meeting. 
• AUD/USD Price Forecast: Monday’s rally stalled around the 50-DMA per the daily chart.

The AUD/USD trims some of its Monday’s gains, trading at 0.7224 during the New York session at the time of writing. The market sentiment is mixed-tilted downbeat as European indices finished the day in the green, while Wall Street’s ones fluctuate between gainers and losers across the pond.

In the last couple of hours, the market sentiment swang aggressively towards a risk-off mood, while the greenback with its US Dollar Index advances some 0.08%, sitting at 96.17, after reaching a daily high at 96.28, as Federal Funds Rate expectations have increased. 

The CME’s FedWatch Tool, which reports market participants’ expectations for monetary policy, showed on Tuesday that for the March 2022 meeting, there’s a 57.3% possibility of a hike from 0-0..25% to 0.25-0.50%. Alongside Federal Reserve’s “hawkish” expectations, a diminish in investors’ risk appetite boosted the prospects of the USD vs. the AUD., which reached a daily high at 0.7263 before dropping as market conditions dampened.

AUD/USD Price Forecast: Technical outlook

The AUD/USD daily chart depicts that the overnight rally of the pair stalled around the 50-day moving average (DMA) 0.7270, to then retreat towards the 0.7220s area. Further, Tuesday’s price action is forming an inverted hammer candlestick with a  “long wick” that shows AUD/USD traders rejecting higher prices, as selling pressure mounted around the 0.7260s area.

On the downside, the AUD/USD buyer’s first line of defense would be the 0.7200 figure. A breach of the latter would expose the September 30 swing low at 0.7169, followed by a test of the August 20 pivot low at 0.7105.