• AUD/USD is seen consolidating its recent fall to the lowest level since January.
• A positive risk tone undermines the USD and benefits the risk-sensitive Aussie.
• The setup still favours bearish traders and supports prospects for further losses.

The AUD/USD pair seesaws between tepid gains/minor losses, though manages to hold its neck above the 0.6700 mark heading into the North American session on Tuesday. The setup, meanwhile, remains tilted in favour of bearish traders and supports prospects for a further near-term depreciating move.

A modest recovery in the risk sentiment undermines the safe-haven US Dollar and turns out to be a key factor lending some support to the risk-sensitive Aussie. That said, rising bets for more interest rate hikes by the Fed remain supportive of elevated US Treasury bond yields and act as a tailwind for the Greenback. This, along with looming recession risks and geopolitical tensions, suggests that the path of least resistance for the AUD/USD pair is to the downside.

From a technical perspective, Friday's breakdown through confluence support near the 0.6800-0.6780 region was seen as a fresh trigger for bearish traders. The said area comprises the 200-day SMA and the 38.2% Fibonacci retracement level of the rally from the October 2022 low. Moreover, oscillators on the daily chart are holding deep in the negative territory and are still far from being in the oversold zone, validating the bearish outlook for the AUD/USD pair.

That said, bearish traders are likely to wait for sustained weakness below the 0.6700 round figure before placing fresh bets. The AUD/USD pair might then accelerate the fall to the 0.6660 zone, or the 50% Fibo. level, en route to the 0.6600 mark. The downward trajectory could get extended further towards the 61.8% Fibo. level, around the 0.6550 region. The latter should act as a strong base for spot prices and help limit further losses, for the time being.

On the flip side, any meaningful recovery attempt beyond the 0.6750 level, or the daily top, could meet with a fresh supply near the 0.6780-0.6800 confluence support breakpoint, now turned resistance. A sustained strength beyond, however, might trigger a short-covering rally and lift the AUD/USD pair to the next relevant hurdle near the 0.6875-0.6880 region. This is followed by the 0.6900 mark and the 23.6% Fibo. level, around the 0.6925 area, which should cap gains.

AUD/USD daily chart

Key levels to watch