AUD/USD Price Analysis: Not out of the woods yet, remains vulnerable to retest 0.7000

• AUD/USD struggled to capitalize on its intraday recovery from a one-week low.
• Hawkish Fed expectations acted as a tailwind for the USD and capped gains.
• The technical setup favours bearish traders amid renewed COVID-19 jitters.

The AUD/USD pair attracted some buying near support marked by the 50% Fibonacci level of the 0.6993-0.7188 recent move up and stalled the previous day's pullback from the 0.7175-80 area. The attempted intraday recovery from a one-week low touched early this Tuesday, however, lacked bullish conviction and remained capped near the 0.7135-40 horizontal support breakpoint.

The US dollar trimmed a part of its intraday losses following the release of the hotter-than-expected US Producer Price Index, which reinforced hawkish Fed expectations. Apart from this, concerns about the potential economic fallout from the Omicron variant underpinned the safe-haven greenback. This, along with the cautious market mood, acted as a headwind for the perceived riskier aussie.

Meanwhile, technical indicators on the daily chart – though have been recovering from lower levels – are still holding in the bearish territory. Moreover, oscillators on the 1-hour chart have again started gaining negative traction and favour bearish traders. That said, it will be prudent to wait for acceptance below the 0.7100 mark before positioning for any further downfall.

The AUD/USD pair might then turn vulnerable to accelerate the slide towards intermediate support near the 0.7060 region. The downward trajectory could further get extended towards challenging the key 0.7000 psychological mark, or the YTD low set earlier this month. Some follow-through selling should pave the way for the resumption of the bearish trajectory witnessed since late October.

On the flip side, the 0.7135-40 region might continue to act as immediate resistance. Any further move up could still be seen as a selling opportunity near the 0.7175-80 zone, which if cleared decisively might negate the bearish bias. The AUD/USD pair might then surpass the 0.7200 mark and test the 0.7225 resistance before eventually aiming to reclaim the 0.7300 round number level in the near term.

AUD/USD 1-hour chart

Key levels to watch