AUD/USD holds onto recovery gains above 0.7750 ahead of US ISM PMI

• AUD/USD clinging onto recovery gains but further upside appears elusive.
• Risk boosted amid a retreat in DXY and Treasury yields, stabilizing bond market.
• Death cross on the hourly chart could be a cause for concern ahead of US ISM.

AUD/USD is consolidating its recovery around mid-0.7700s, having hit two-week lows at 0.7692 on Friday.

The aussie rose as high as 0.7772 amid a return of risk appetite and upbeat Australian jobs advertisement and home prices data, although failed to hold at higher levels after the Chinese Caixin Manufacturing PMI disappointed markets.

The recovery in the risk sentiment could be attributed to the semblance found by the bond markets globally after last week’s carnage that led the yields sky-high.

The surge in Treasury yields worldwide raised concerns over pre-mature tightening by the central banks, in light of rising growth and inflation expectations.

The rally in Treasury yields spooked markets and boosted the safe-haven US dollar higher at the expense of the higher-yielding currencies such as the aussie dollar.

Markets now shift their attention towards the US ISM Manufacturing PMI release and Tuesday’s RBA monetary policy decision for fresh trading impetus.

In the meantime, the pair will continue taking cues from the broader market sentiment and yields.

AUD/USD: Technical outlook

As observed on the hourly chart, AUD/USD is looking to retest the daily highs at 0.7772, having defended the 21-hourly moving average (HMA) at 0.7742 so far.

Despite the renewed upside attempt, the bulls remain cautious amid a death cross confirmed on the said time. The 50-HMA crossed the horizontal 200-HMA from above, representing a bearish crossover.

The 21-HMA could be taken out if the selling pressure returns, below which the falling channel resistance now support at 0.7670 could be tested.

Note that the price charted a falling channel breakout in the early Asian trades.

The relative strength index (RSI) edges higher but remains below the 50 level, suggesting that the downside bias still remains intact.

AUD/USD: Hourly chart

AUD/USD: Additional levels