AUD/USD rebounds firmly to 0.7050 but bear cross looms ahead of RBA

• AUD/USD ends a three-day sell-off to recapture 0.7000 and beyond.
• The US dollar retreat remains the may theme amid risk-on mood.
• Impending bear cross caution AUD bulls ahead of the RBA verdict.

AUD/USD has reversed Friday’s drop, as it extends its recovery from 18-month lows of 0.6966 on Monday.

In doing so, the spot has recaptured the 0.7000 barrier, closing in on the 0.7050 psychological hurdle, as the US dollar extends its correction amid a risk-on market profile.

The greenback is paring back the hawkish Fed-led gains, as the Treasury yields turn south in early European trading. The aussie bulls ignore the discouraging Chinese business PMIs released over the weekend, as the sentiment around the US dollar remains in play.

The uptick in the aussie could be associated with the market’s repositioning ahead of Tuesday’s Reserve Bank of Australia’s (RBA) first monetary policy meeting of 2022, where the central bank is widely expected to end the emergency asset purchases.

Technically, AUD/USD is looking to extend the rebound towards 0.7100, backed by the V-shaped recovery in the 14-day Relative Strength Index (RSI).

However, the further upside appears limited, as the RSI still remains below the midline, despite the renewed upside.

Adding credence to the downbeat view, the 21-Daily Moving Average (DMA) is on the verge of cutting the 50-DMA for the downside, which if materializes on a daily closing basis will confirm a bear cross.

If the selling spiral resumes, then the 0.7000 resistance-now-support will get tested again, below which floors will open for a retest of the multi-month troughs.

AUD/USD: Daily chart

AUD/USD: Additional levels to consider