The AUD/USD looked vulnerable at the end of last week and appeared poised for a significant slide lower.
Instead it has steadied and is 1.25% higher than Friday's close.
The resilience shown by the AUD/USD may start to frustrate bears and lead to further gains in the coming days.
The case for a lower AUD/USD appeared compelling at the end of last week.
Federal Reserve expectations had taken a hawkish turn following the FOMC meeting and comments from key Fed members nL2N2NZ25A.
The view from the Fed contrasted with dovish signals from the Reserve Bank of Australia.nL2N2O505R
One of the main factors behind the strong gains in the AUD/USD since the first quarter of 2020 has been the huge gains in iron ore and copper.
Both commodities came under pressure last week amid calls they were ready to correct lower. nL2N2O405OnL2N2O304G
It appears AUD/USD bulls are not yet ready to throw in the towel.
According to a note from Morgan Stanley this week, leveraged traders indicate that "long AUD has been a favoured way to play for the global recovery".
Judging by the price action in equity markets, the hawkish tweak to the Fed outlook hasn't dimmed optimism the global economy will continue to bounce back strongly from the pandemic.
The AUD/USD has broken back above the 200-day moving average at 0.7558 to relieve downward pressure, but needs to break above the 38.2 Fibonacci retracement of the 0.7891/0.7478 move at 0.7635 to confirm a bottom is in place.
Conversely, a break below 0.7475 would likely energise AUD/USD bears and accelerate downward price action.
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