• AUD/USD looks to extend corrective slide from five-month tops.
  • Potential rising channel on hourly sticks points to the additional downside.
  • Overbought RSI and profit-taking could lend support to the bears.

AUD/USD is consolidating the sharp correction from five-month tops of 0.6983 reached in early Asia, as the bears await a fresh catalyst for the next push lower.

The aussie pared back gains after the Australian GDP contracted, as expected, in Q1. Meanwhile, markets took that as an excuse to take profits off the table following the relentless rise seen in the major so far this week.

The higher-yielding, AUD/USD, rallied hard on the narrative of a stronger economic rebound, as major economies re-emerge from the coronavirus pandemic-imposed lockdowns and travel bans.

Broad-based US dollar weakness amid a risk-on market environment continues to offer some support to the bulls. At the time of writing, the aussie adds 0.55% to trade at 0.6931, with room for additional corrective downside likely, as suggested by the technical set up on the hourly chart (1H).

Despite the upsurge, the spot is wavering in a rising channel formation on 1H, with a break below the trend line support of 0.6914 to validate the formation. Sellers will fight back control below the latter, opening floors for a test of the upward sloping 21-hourly Simple Moving Average (SMA) at 0.6888.

Should the bears fail to defend the 21-HMA support, the slide could extend towards the confluence of the pattern target and bullish 50-HMA near 0.6824/20.

The hourly Relative Strength Index (RSI) is overbought and has turned south, indicating some bearishness in the near-term.

Alternatively, a bounce off the channel support could see the spot revisit the multi-month tops. A break above which could expose the key 0.7000 level to the buyers. 

AUD/USD: 1-hour chart

 

AUD/USD: Additional levels