AUD/USD retreats from two-week tops, slides further below mid-0.7600s

• AUD/USD witnessed an intraday turnaround of around 40 pips from two-week tops.
• A modest pickup in the USD demand was seen as a key factor exerting some pressure.
• Repeated failures at higher levels support prospects for a further near-term downfall.

The AUD/USD pair retreated nearly 40 pips from two-week tops and refreshed daily lows, around the 0.7640-35 region during the early European session.

The pair built on the previous day's goodish rebound from the 0.7600 neighbourhood and edged higher through the early part of the trading action on Wednesday. The uptick, however, lacked any follow-through buying and quickly ran out of the steam near the 0.7675 region amid the emergence of some buying around the US dollar.

The USD found some support from a generally softer risk tone around the equity markets and staged a modest rebound from two-week lows. The upbeat outlook for the US economy continued underpinning the USD, though a fresh leg down in the US Treasury bond might keep a lid on any further gains, at least for the time being.

Investors remained optimistic about the prospects for a relatively faster US economic recovery from the pandemic, thanks to the impressive pace of coronavirus vaccination. This, along with US President Joe Biden's over $2 trillion infrastructure spending plan, has been fueling speculations about an uptick in US inflation.

This, in turn, raised doubts that the Fed would retain ultra-low interest rates for a longer period. That said, the market now seemed to roll back expectations that the Fed will tighten its monetary policy earlier than anticipated, which turned out to be a key factor dragging the US bond yields across the board.

Hence, the key focus will remain on Wednesday's release of the latest FOMC meeting minutes, due later during the US session. Apart from this, Fed Chair Jerome Powell's scheduled speech on Thursday will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the AUD/USD pair.

From a technical perspective, the pair once again failed near ascending trend-line support, marking the neckline of a bearish head-and-shoulders pattern. This validates the near-term negative outlook and supports prospects for the resumption of the recent sharp retracement slide from three-year tops, around the 0.8000 mark touched on February 25.

Technical levels to watch