AUD/USD clings to strong recovery gains amid falling US bond yields

The AUD/USD pair was seen building on to its recovery move and has now reversed majority of previous session's losses to fresh 4-month lows.

Currently trading around 0.7375-80 band, the pair held on to daily gains despite of some renewed US Dollar buying interest. Traders also seemed to have shrugged off a mildly negative tone surrounding copper prices, which derives demand for commodity-linked currencies, including the Australian Dollar.

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The pair's up-move lacked any fundamental drivers and hence, could be categorized as a technical bounce from slightly near-term oversold territory. A sharp pull-back in the US treasury bond yields seems to be the sole factor prompted traders to lighten their bearish bets around higher-yielding currencies - like the Aussie.

However, with investors starting to price-in an eventual June Fed rate-hike, it would be interesting to see if the current pull-back is backed by any genuine buying or is solely led by short-covering, which might run into fresh supply at higher levels. 

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Next on tap would be the release of export / import price index from the US ahead of Boston Fed President Eric Rosengren speech, which would be looked upon for fresh clues over the central bank's near-term monetary policy outlook.

Technical levels to watch

Any further recovery move is likely to confront resistance near the 0.7400 handle, above which a fresh bout of short-covering has the potential to continue boosting the pair further towards 0.7425-30 resistance en-route 0.7460 strong hurdle. 

On the flip side, retracement back below mid-0.7300s now seems to find support near 0.7335-30 area, which if broken would turn the pair vulnerable to accelerate the slide towards the 0.7300 handle before eventually dropping to test its next support near 0.7285-80 horizontal level.