The pair traded to fresh highs in two months after the US CPI data yesterday but the daily close fell short of breaching the 100-day moving average (red line). That key resistance level is once again the focus today and we are seeing buyers look to test waters above that at 0.7085 at the moment.
Hold above and the bearish bias in the pair will be put off as there is the scope for price action to trade towards the 200-day moving average (blue line), seen at 0.7150 currently. These key technical levels have been vital in definining and limiting price moves in AUD/USD, as evident from the chart above since May trading.
As such, they will be key levels to pay attention to in gauging the potential for the next leg lower in the dollar against the aussie. Across other dollar charts, the greenback also has key levels that are being contested, or close to, at the moment as seen with the euro, pound, yen, and loonie.
The coherent technical picture across multiple pairs exemplifies the notion that dollar sentiment is the key driver in FX at the moment, as markets continue to look for clues on the Fed pivot. For now, we're still caught up in the reaction to the US jobs report from Friday last week and the US CPI data yesterday. The dollar is softer and while there is scope for a further drop, there needs to be confirmation from the technicals and we are approaching that crossroads towards the end of the week.