AUD/USD: Supply caps minor recovery near 0.7830

• DXY regains bids in early Europe.
• Holds above 0.7800.
• Focus shifts to Australian retail sales.

AUD/USD witnessed good two-way price-action so far this Wednesday, now heading back towards the four-day lows of 0.7808 amid resurgent USD demand.

AUD/USD: Vulnerable below 0.7800

The recovery in the Aussie lost legs near the support-turned-support area near 0.7830, as mixed Chinese inflation figures continued to dampen the sentiment. China's Dec CPI ticks higher, but misses estimates

Moreover, the renewed strength seen around the US dollar against its main competitors amid rising Treasury yields, especially with 10-year yields hitting fresh ten-month tops of 2.564%. The rally in Treasury yields also dulls the attractiveness of the Aussie as an alternative higher-yielding currency.

Focus now remains on the Treasury yields price-action for further momentum in the pair, as markets await the Aus retail sales release for fresh direction on the AUD.

AUD/USD Preferred Strategy

FXStreet’s Chief Analyst, Valeria Bednarik, noted: “A big static support comes at 0.7745, the 61.8% retracement of the October/December decline, considered now a line in the sand, as a break below it will imply a bearish continuation for the upcoming sessions. Support levels: 0.7800 0.7770 0.7745. Resistance levels: 0.7850 0.7895 0.7920.”