The AUD/USD currency pair falls before the 0.7000 level and declines from a multi-month high achieved on Friday. Several variables work together to increase USD demand and provide downward pressure on the pair. Bulls are favored by the technical setup, which also offers opportunities for some dip-buying to arise.

The AUD/USD pair dropped during the early North American session after reaching the psychological barrier of 0.7000, which was also its highest point since August 26. In the past hour, the pair has fallen to a new daily low in the vicinity of 0.6935, wiping out some of the previous day’s post-US CPI gains and ending a two-day winning run.

The US Dollar can halt its current drop to a seven-month low thanks to a minor increase in US Treasury bond rates. In addition, the risk-off impulse, shown by a rapid decline in the equities markets, strengthens the US dollar’s relative safe-haven position and burdens the risk-averse Australian. Nevertheless, increasing expectations for lesser Fed rate rises may temporarily maintain a lid on the dollar’s advances and prevent the major from suffering more losses.

Technically speaking, the AUD/USD pair has been moving upward along an ascending channel for around three months, which suggests that an uptrend is well-established. Additionally favoring optimistic traders is the recent break-out through the crucial 200-day SMA and the overnight strength above the 50% Fibonacci retracement level of the April–October 2022 decline. This indicates the possibility of some dip-buying emerging, combined with bullish oscillators on the daily chart.

Therefore, any future decline is more likely to encounter solid resistance at the 0.6900 level than the horizontal range of 0.6870-0.6865. Support then comes in the vicinity of the 200-DMA around 0.6830, which should now serve as a turning point for the AUD/USD pair. A solid breach for the downside might accelerate the decline toward the 0.6800 level and the trend-channel support. This one is estimated to be in the mid-0.6700s and is getting close to the 38.2% Fibo level, which should stop any further slide.

On the other hand, bulls could hold off on putting new bets until a prolonged strength is above the 0.7000 level. The AUD/USD pair may overcome a stepping stone between the price ranges of 0.7030-0.7035 and 0.7070-0.7075 before advancing to the round number of 0.7100.

Daily chart for AUD/USD