AUD/USD Price Analysis: Bears await acceptance below 0.7400 mark/50% Fibo. level

• AUD/USD dropped to over a three-week low on Wednesday amid sustained USD buying.
• The setup supports prospects for an extension of the recent pullback from the YTD peak.
• Sustained strength back above the 0.7500 mark is needed to negate the bearish outlook.

The AUD/USD pair dropped to over a three-week low during the early North American session on Wednesday and is now looking to extend the downward trajectory further below the 0.7400 mark.

The US dollar stood tall near its highest level since May 2020 and remained supported by expectations that the Fed will tighten its monetary policy at a faster pace to curb soaring inflation. The bets were further boosted by the US Producer Price Inflation, which surpassed estimates and accelerated to 11.2% YoY in March from 10.0% in the previous month.

Investors also remain concerned about the potential economic fallout from the war in Ukraine, which was evident from the prevalent caution mood around the equity markets. This was seen as another factor that benefitted the greenback's relative safe-haven status and drove flows away from perceived riskier currencies, including the Australian dollar.

From a technical perspective, the overnight attempted recovery move faltered just ahead of the 0.7500 psychological mark. The subsequent decline - for the fifth day in the previous six - favours bearish traders. This, in turn, supports prospects for an extension of the recent sharp pullback from the 0.7660 region, or the YTD peak touched earlier this month.

That said, spot prices, so far, have been showing resilience below the 50% Fibonacci retracement level of the 0.7165-0.7662 strong rally. This is closely followed by the 200-period SMA on the 4-hour chart, around the 0.7385 region, which should now act as a pivotal point for short-term traders and help determine the next leg of a directional move.

A convincing break below should pave the way for a slide towards testing the 61.8% Fibo. level, around mid-0.7300s. This is closely followed by the lower end of an ascending trend-line extending from sub-0.7000 levels, around the 0.7330-0.7325 region, which if broken decisively will be seen as a fresh trigger for bearish traders.

Given that technical indicators on the daily chart have just started drifting into negative territory, the AUD/USD pair could then accelerate the downfall towards the 0.7300 mark. Some follow-through selling would make the pair vulnerable to extending the downward trajectory towards the 0.7240 region en-route the 0.7200 mark and the 0.7175-0.7170 support.

On the flip side, the daily swing high, around the 0.7475 region, which coincides with the 38.2% Fibo. level now seems to act as an immediate strong resistance ahead of the 0.7500 mark. Sustained strength beyond would suggest that the corrective pullback has run its course and shift the bias in favour of bulls, setting the stage for the resumption of the prior uptrend.

AUD/USD daily chart

Key levels to watch