• AUD/USD staged a goodish rebound from the 0.7225 area or multi-week low.
• The set-up favours bearish traders and supports prospects for additional losses.

The AUD/USD pair maintained its bid tone heading into the North American session and was last seen hovering near the top end of its daily trading range, just above mid-0.7200s.

A generally positive tone around the equity markets turned out to be a key factor that extended some support to the perceived riskier aussie on the first day of a new week. This, along with a subdued US dollar price action, assisted the AUD/USD pair to recover a part of Friday's losses to the lowest level since October 6.

From a technical perspective, last week's downfall confirmed a near-term bearish break below an upward sloping channel extending from the 0.7100 neighbourhood, or YTD low set in August. This, in turn, supports prospects for an extension of the recent sharp pullback from levels just above mid-0.7500s, or a multi-month high.

The bearish outlook is reinforced by the fact that the AUD/USD pair is trading well below technically significant moving averages – 100 and 200-day SMA. Apart from this, bearish technical indicators are still far from being in the oversold conditions on the daily chart and further add credence to the near-term negative bias.

Hence, any subsequent positive move might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the 0.7300 mark. This should now act as a key barrier for the AUD/USD pair, which if cleared might trigger a short-covering move and allow bulls to challenge 100-DMA, around the 0.7355-60 region.

On the flip side, the 0.7225 area now seems to have emerged as immediate support. This is followed by the 0.7200 mark. Some follow-through selling will validate the bearish breakdown and turn the AUR/USD pair vulnerable to accelerate the fall towards the 0.7140-35 intermediate support en-route the 0.7100 round-figure mark.

AUD/USD daily chart

Technical levels to watch