AUD/USD: Bulls step in a shorts take profits, eyes on 0.7240s

• AUD/USD has stalled on the downside and the focus is now for a correction. 
• Bears eye a downside extension from critical resistance area. 

AUD/USD is starting out in the Asian day in fresh cycle lows. The price fell on Monday from 0.7273 to a new low of 0.7221. The move came on the back of a strong surge in the greenback as the White House renominated Federal Reserve chair, Jerome Powell.

The dollar set a 16-month high against the euro on Monday after Federal Reserve Chair Jerome Powell was nominated for a second four-year term by President Joe Biden, while the single currency was hurt by COVID-19 related lockdowns. Lael Brainard, the Federal Reserve board member who was the other top candidate for the job, will be vice-chair. The market was positioned for a more dovish outcome and this set off a rally in the greenback. 

The dollar got additional support from bullish comments at the end of the last week when the Federal Reserve officials Richard Clarida and Christopher Waller advocated for a faster pace of stimulus tapering amid a quickening recovery and heated inflation. Looking ahead, with respect to the Fed, the minutes of the Federal Open Market Committee's meeting early this month. These minutes are of the meeting where the Fed announced the start to tapering and traders will be holding for some more insight on how many Fed officials are considering faster tapering or earlier rate increases.

Domestically, the Net AUD short positions have edged lower, but remain fairly elevated reflecting the dovish tone of the Reserve Bank of Australia. However, the market is overstretched on the downside in the Aussie.  October Retail Sales on Friday would be expected to move the needle, potentially. For the meantime, a pullback would be expected as per the following technical analysis:

AUD/USD technical analysis

The pair scored a fresh low which opens the risk of a downside continuation. However, in the first instance, a pullback to the 38.2% Fibonacci retracement level could be in order near to 0.7240.