• AUD/USD dives to fresh low since January amid sustained USD buying and risk-off mood.
• Weakness below the 200-day SMA and the 38.2% Fibo. pave the way for further losses.
• Attempted recovery back above the 0.6800 mark could be seen as a selling opportunity.

The AUD/USD pair comes under heavy selling pressure on the last day of the week and dives to the 0.6750 area, or a fresh low since January 6 during the mid-European session.

Firming expectations that the Federal Reserve will keep interest rates higher for longer in the wake of stubbornly high inflation continue to push the US Dollar higher. Apart from this, the prevalent risk-off mood - amid looming recession risks and geopolitical tensions - benefits the safe-haven buck and drives flows away from the risk-sensitive.

The aforementioned fundamental factors drag the AUD/USD pair below a technically significant 200-day Simple Moving Average (SMA). A subsequent slide below the 38.2% Fibonacci retracement level of the October 2022-February 2023 rally could be seen as a fresh trigger for bearish traders and might have already set the stage for deeper losses.

The negative outlook is reinforced by the fact that oscillators on the daily chart are holding deep in the bearish territory and are still far from being in the oversold zone. Hence, some follow-through weakness towards the 0.6700 round-figure mark, en route to the YTD low, around the 0.6685 zone set in January, looks like a distinct possibility.

On the flip side, the 0.6780 region, or the 38.2% Fibo. level, now seems to act as an immediate hurdle ahead of the 200-day SMA, near the 0.6800 mark. Any further recovery is more likely to attract fresh sellers near the 0.6855-0.6860 region. The latter should act as a pivotal point, which if cleared could prompt some short-covering around the AUD/USD pair.

AUD/USD daily chart

Key levels to watch