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  • Bears continue to guard the 0.7315/20 barrier, risk-off back in vogue?
  • Monetary policy divergence to weigh on the AUD ahead of RBA and Fed minutes.

The AUD/USD pair paused its three-day rebound and came under fresh selling pressure in Asia this Monday, as the bears return amid re-emergence of the Australian political tensions.

Markets are speculating for early Australian elections after the local press reported that Peter Dutton is leaning towards challenging Malcolm Turnbull for the Prime Ministership while a new poll showed support for the Coalition has slumped.

Moreover, a lack of fresh developments around the US-China trade talks seems to also add to the negative tone seen around the Aussie. Further, falling copper prices combined with risk-off trades on the Asian equities also collaborate to the renewed downside in the higher-yielding currency.

In the week ahead, the spot remains exposed to further downside risks, as the divergent monetary policy outlooks between the Fed and RBA will continue to remain US dollar supportive, as the RBA is likely to keep rates on hold until early 2019 while the Fed is on track for two more rate hikes this year.  

In the meantime, the pair will take cues from the risk trends and US dollar dynamics as the US docket remains data empty for today. The focus also remains on the RBA Governor Lowe’s speech due later at 2200 GMT.

AUD/USD Technical Levels

According to FXStreet’s Chief Analyst, Valeria Bednarik, “technically, the advance seems corrective given that in the daily chart, indicators have recovered from oversold readings, maintaining upward slopes but well below their midlines, as the price remains far below bearish moving averages. Shorter term, and according to the 4 hours chart, the technical outlook is more encouraging, as technical indicators remain near overbought readings, as the price moved far above its 20 SMA, which slowly gains upward traction. Support levels: 0.7270 0.7230 0.7190. Resistance levels: 0.7340 0.7380 0.7415.”