Recovers from 3-week lows, upside appears limited

• The oversold RSI on the hourly charts helped the AUD / USD rebound from the support of the descending channel.
• Expectations of an aggressive Fed, risk aversion momentum propped up the USD and could limit the upside.
• Any further recovery could face stiff resistance near 0.7300 and remains limited.

The pair AUD/USD managed to recoup its intraday losses and rose again closer to the daily highs, around the 0.7360 area during the early days of the American session. The extremely oversold RSI on the hourly charts helped the pair find decent support near the lower bound of a nearly two-week downtrend channel.

However, the strong bullish sentiment prevailing around the US dollar, amid expectations of an imminent Fed phase-down announcement, could continue to act as a headwind for the AUD / USD pair. Aside from this, the risk aversion momentum in the markets could do further to limit gains for the riskier Aussie.

Even from a technical perspective, last week’s sustained break below the 0.7300 mark was seen as a new trigger for bearish traders. Furthermore, the oscillators on the daily chart have been gaining negative traction and are still far from oversold territory, warranting some caution before positioning for further recovery.

Therefore, any subsequent upward movement could still be seen as a short opportunity near the 0.7300 mark. This, in turn, should limit the AUD / USD pair near the trend channel resistance, currently near the 0.7315 region. The latter should act as a key point for short-term traders, which if exceeded will cancel out the negative bias.

On the other hand, the daily swing lows, around the 0.7220 area, now appear to have emerged as immediate support. Some subsequent selling will mark a further bearish breakout and make the AUD / USD pair vulnerable. The next relevant support is pegged near the round figure of 0.7100, or the yearly lows touched on August 20.

4 hour chart

Technical levels