AUD/USD Price Forecast: Slides to over one-week low; 0.7125 confluence holds the key

The AUD/USD pair drops to a one-and-a-half-week low during the Asian session on Wednesday and currently trades around the 0.7135 region, down for the second straight day.

The initial market reaction to Australia's better-than-expected Q2 GDP print fades rather quickly amid some follow-through US Dollar (USD) buying, bolstered by rising US Federal Reserve (Fed) rate hike bets and escalating US-Iran tensions. This, in turn, suggests that the path of least resistance for the AUD/USD pair is to the downside and backs the case for an extension of the recent pullback from levels just above the 0.7200 mark, or the highest since mid-May, touched last Friday.

Any subsequent fall is more likely to find decent support near the 0.7125 confluence – comprising the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 23.6% Fibonacci retracement level of the June-August rally. This, in turn, suggests a supportive technical backdrop, even as the Relative Strength Index (14) eases back toward the mid-30s. Moreover, the Moving Average Convergence Divergence (MACD) hints at waning momentum rather than an outright bearish reversal.

A convincing break below the said support, however, would expose subsequent Fibonacci supports near 0.7074, 0.7033 and 0.6992, with broader structure extending toward 0.6934 and 0.6860. On the top side, the 0.7170 horizontal zone could act as an immediate hurdle ahead of the 0.7200 mark, which, if conquered, will be seen as a fresh trigger for bullish traders. Nevertheless, the AUD/USD pair keeps the short-term bullish tone intact as long as it sustains trading above the 0.7125 confluence.

AUD/USD 4-hour chart