Seems vulnerable near YTD low, bearish double-top breakdown in play

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• AUD/USD drifts lower for the fifth successive day and drops to a fresh YTD low on Monday.
• A softer risk tone and a modest USD strength exert heavy pressure on the risk-sensitive Aussie.
• The technical setup favours bearish traders and supports prospects for further near-term losses.

The AUD/USD pair continues losing ground for the fifth successive day and drops to a fresh low since November 2022, closer to mid-0.6400s during the Asian session on Monday.

The worsening economic conditions in China, along with US-China tensions and geopolitical risks, temper investors’ appetite for riskier assets and drive flows away from the risk-sensitive Australian Dollar (AUD). The US Dollar (USD), on the other hand, climbs to a multi-week top and remains well supported by growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer. This, in turn, is seen exerting downward pressure on the AUD/USD pair and contributing to the ongoing decline.

From a technical perspective, a subsequent slide and acceptance below the 0.6500 psychological mark add credence to the recent breakdown through the bearish double-top neckline support near the 0.6600 horizontal level. This, along with the aforementioned fundamental backdrop, suggests that the path of least resistance for the AUD/USD pair is to the downside. That said, the Relative Strength Index (RSI) on the daily chart has moved on the verge of breaking into the oversold zone and warrants some caution.

Hence, it will be prudent to wait for some near-term consolidation or a modest bounce before traders start positioning for a further depreciating move. Any attempted recovery, however, is more likely to confront stiff resistance and meet with a fresh supply near the 0.6500 mark. This, in turn, should cap the AUD/USD pair near the 0.6530 area, which should now act as a pivotal point. A sustained strength beyond might trigger a short-covering rally and lift spot prices towards the 0.6600 round figure.

The latter is closely followed by last week’s swing high, around the 0.6615 region, above which the AUD/USD pair could extend the momentum further towards the 0.6700 mark, representing the 50-day Simple Moving Average (SMA), en route to the very important 200-day SMA, currently pegged around the 0.6725-0.6730 area.

The AUD/USD pair, meanwhile, seems poised to weaken further below the 0.6455-0.6450 area and eventually drop to the 0.6400 round figure. Some follow-through selling will expose the next relevant support near the 0.6365-0.6360 region and the 0.6300 mark, which if broken decisively will be seen as a fresh trigger for bearish traders and pave the way for further losses.

AUD/USD daily chart

Technical levels to watch