AUD/USD inter-market: Expect aggressive selling below 200-DMA

The AUD/USD pair is in a phase of bearish consolidation so far this session, after having struck fresh four-week lows at 0.7543 in the Asian session, just ahead of the 200-DMA located at 0.7542.

The Aussie is on a retreat from three-month tops scored at 0.7743 last week, and since then it has lost almost 200-pips amid strengthening treasury yields and US dollar across the board on increased odds for a March Fed rate hike, fuelled by hawkish Fedspeaks and upbeat US fundamentals.

While markets have been largely ignoring auspicious Australian economic releases, including the latest Q4 GDP data, as Trump trade and March Fed rate hike bets continue to drive the USD markets. Markets are pricing-in a 70% chance of a March rate lift-off by the Fed. Hence, yield spread differential between the 10-yr US-Aus bond yields continue remain USD positive.

The spot posted the biggest daily loss since November 9 on Thursday after the two-year treasury yields jumped to its highest level since 2009, driving the greenback sharply higher. The Aussie was also aggressively sold-off as iron-ore prices showed signs of topping out. Iron ore prices have fallen almost 4% since reaching a more than two-year high last week. 

In terms of technicals, the pair finds the immediate support located at 0.7543/42 (multi-week low/ 200-DMA). Selling pressure is likely to intensify below the last, dragging the Aussie to 0.7523/21 (Jan-mid lows/ Classic S1) and below that 0.7507/00 (Jan 27 low/ round number). On the flip side, the immediate resistance at 0.7583 (50-DMA) above which gains could be extended to the next hurdle located 0.7600/02 (round figure/ daily pivot) and 0.7507 (classic R1/ 10-DMA).