AUD/USD struggles near two-month low, holds above 0.7200 ahead of US PMIs

• AUD/USD was seen consolidating its recent losses to the lowest level since early October.
• The USD bulls took a brief pause near a 16-month peak and extended support to the pair.
• Hawkish Fed expectations acted as a tailwind for the USD and capped gains for the major.

The AUD/USD pair seesawed between tepid gains/minor losses through the mid-European session and consolidated its recent slide to the lowest level since October 1. The pair was last seen hovering around the 0.7225-20 region, nearly unchanged for the day.

The US dollar bulls took a brief pause following the recent strong run-up to a 16-month peak, which, in turn, assisted the AUD/USD pair to find some support ahead of the 0.7200 round-figure mark. However, a combination of factors kept a lid on any meaningful recovery for the major.

US President Joe Biden formally nominated Jerome Powell to serve as the chairman of the Federal Reserve for a second term and reinforced bets for higher US interest rates. This, in turn, continued pushing the US Treasury bond yields higher, which act as a tailwind for the greenback.

Apart from this, concerns over the rising number of COVID-19 cases in Europe and the reimposition of lockdown measures should limit the downside for the safe-haven greenback. This further collaborated to cap the upside for the AUD/USD pair, warranting caution for aggressive bullish traders.

Even from a technical perspective, the overnight turnaround from the 0.7270-75 area validated an ascending trend-channel breakdown. Some follow-through selling below the 0.7200 mark will reaffirm the negative bias and set the stage for an extension of the recent downward trajectory.

Market participants now look forward to the release of flash US PMI prints for November. This, along with the US bond yields, could influence the USD price dynamics. Traders will further take cues from the broader market risk sentiment for some short-term opportunities around the AUD/USD pair.

Technical levels to watch