AUD/USD extends recovery to 0.7250, taps 200-DMA

The AUD/USD pair extended its rally beyond 0.7200 handle to currently trade close to the very important 200-day SMA region after a surprisingly strong building approvals data.

According to the data released by Australian Bureau of Statistics earlier today, Australian building approvals for April increased 3.0% on a month-on-month basis as against an estimated decline of 3.0%. Meanwhile, Australia's current account deficit in the first quarter shrank to 20.8 from 22.6 billion in the fourth quarter of 2015.

Moreover, a broad profit-taking move witnessed in the US Dollar also seems to assist the pair. The pair has now moved close to its immediate strong resistance around 200-day SMA region, near 0.7250 level. Investors will now look forward to the slew of important economic releases, including US core PCE price index on Tuesday along with Australian GDP and Chinese manufacturing PMI on Wednesday, for near-term direction for the pair.

Technical levels to watch

A follow through buying interest above 200-day SMA resistance is likely to assist the pair further towards testing its next major resistance, beyond 0.7300 handle, near 0.7320-25 area. 

On the flip side, 0.7220 level, closely followed by 0.7200 handle, now becomes immediate support levels to watch for. Reversal from 200-day SMA resistance and a subsequent break back below 0.7200 handle would negate Tuesday's recovery, making the pair vulnerable to resume its near-term downward trajectory towards retesting nearly 3-month lows support near 0.7150-45 zone.