AUD/USD upside capped at 200-DMA, weakens back below 0.7200

Extending its Monday's reversal from the very important 200-day SMA resistance, the AUD/USD pair extended its slide on Tuesday after the RBA Governor Stevens hinted towards further easing in the near-future.

The pair broke through 0.7200 handle and is now within striking distance of over two-and-half month low of 0.7176 tested in the previous week. The comments revealed that RBA was committed to target inflation using monetary policy tools. The latest inflation data for the March quarter recorded its biggest drop in seven years, increasing the prospects of further interest rate cut by the central bank.

On Monday, the pair attempted a minor recovery, which got sold into near 200-day SMA support turned immediate resistance. The pair is now sustaining its weakness below and hence remains vulnerable to further downside in the near-term.

Technical levels to watch

Weakness below multi-month lows support near 0.7180 level seems to open room for an immediate drop towards 0.7120-10 horizontal support, below which the pair is likely to extend its downward trajectory towards its next major support near 0.7060-50 zone.

Meanwhile on the upside, day’s peak near 0.7220-25 area now seems to act as immediate resistance. Although momentum above day’s peak resistance is likely to boost the pair, but any further up-move might remain capped at 200-day SMA resistance near 0.7260-65 region. Only a decisive break through 200-day SMA resistance might negate the near-term bearish outlook.