Friday's upbeat U.S. jobs report has seriously dented prospects for AUD/USD longs and the risks for a deeper slide seem to be increasing.
The jobs data has underpinned the greenback as declines in eurodollar EDH0 and fed funds futures FFH0 prices suggest market expectations for Fed rate cuts FEDWATCH have been tempered.
AUD/USD remains heavy after peaking at 0.7048 last week and technicals highlight increased downside risks.
The 10-DMA has capped overnight gains and RSIs suggests bears have momentum on their side.
Add in a long upper wick on today's candle, and a test of short-term support near 0.6940/30 now seems likely.
Key risks from the Fed this week could determine if that support holds or not.
Indeed, Powell's testimony to congress, FOMC minutes and a slew of Fed speakers are on the docket.
Should Fed rhetoric disappoint those looking for a dovish tone, the U.S. interest rate complex is likely to rise which would buoy the greenback.
AUD/USD's slide is then likely to extend through 0.6940/30 targeting June's 0.6832 low.
However, some caution is still warranted for AUD/USD bears.
Net-short aussie positions remain elevated and expectations for further RBA rate cuts have been reduced RBAWATCH, YBAH0 suggesting any move lower is likely to be a grind.
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