AUD/USD testing critical support at 0.7190 amid risk-aversion

  • AUD/USD takes a hit in sync with the risk sentiment on the Fed’s tightening concerns.
  • The US dollar holds the recent rebound while global tech sell-off extends.
  • The aussie ignores strong Chinese Caixin Services PMI, as it nears key support.

AUD/USD is breaking below the 0.7200 level in a renewed selling wave that has caught the high-beta assets, as investors continue to weigh the increased odds of aggressive Fed tightening.

The Fed December meeting’s minutes revealed that the central bank is prepared for earlier and faster rate increases to counter inflation while kicking off a reduction in its overall asset holdings.

Expectations of aggressive Fed’s tightening spooked investors and triggered a massive tech sell-off on the global bourses. Markets weighed in the Fed’s hawkishness against the economic recovery and looming Omicron covid variant risks.

The higher-yielding aussie shrugs off a jump in the Chinese Caixin Services PMI to 53.1 in December, as the damp mood remains a drag. Additionally, the Fed-RBA monetary policy divergence also collaborates to the downside in the aussie pair.

Attention now turns towards the US ISM Services PMI data and incoming covid updates for a fresh trading impetus in the major.

AUD/USD: Technical outlook

AUD/USD: Daily chart

Technically, the pair is challenging the critical daily support line at 0.7190, as of writing. That level is the confluence of the 21-Daily Moving Average (DMA) and rising trendline support.

A sustained break below the latter will trigger a fresh downtrend towards 0.7100.

The 14-day Relative Strength Index (RSI) has pierced through the midline to the downside, allowing room for more declines.

Alternatively, buyers need acceptance above the bearish 50-DMA, now placed at 0.7235 to take on the recovery mode.

AUD/USD: Additional levels to consider


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