AUD/USD off lows, still deep in the red near YTD lows

   •  Aussie CAPEX data offset slightly better Chinese PMI.
   •  Subdued US bond yields/positive commodities lend some support.
   •  US data/Powell’s testimony should provide fresh impetus.

The AUD/USD pair remained heavily offered for the third consecutive session and tumbled to fresh YTD lows during the Asian session on Thursday.

Against the backdrop of resurgent US Dollar demand, the pair was further weighed down by today's Aussie Private CAPEX figures for the fourth quarter of 2017. Even a slightly better-than-expected Chinese Caixin PMI print for January, which tends to derive demand for the China-proxy Australian Dollar, did little to stall the pair's sharp fall to an intraday low level of 0.7717. 

Adding to this, some follow-through technical selling, especially after yesterday's bearish break below the very important 200-day SMA, further collaborated to the pair's sharp downfall to its lowest level since December 27. 

The selling pressure now seems to have abated a bit, at least for the time being, and the pair has managed to rebound around 15-20 pips from lows. A subdued action around the US Treasury bond yields and a mildly positive trading sentiment around copper prices turned out to be key factors lending some support to higher-yielding/commodity-linked currencies - like the Aussie.

Traders now look forward to a flurry of US economic releases, with ISM manufacturing PMI as a key highlight, for some fresh impetus. The key focus, however, would be on the Fed Chair Jerome Powell's second appearance before the Congress, which should once again reinforce prospects for at least three Fed rate hike moves in 2018 and drive the pair in the near-term. 

Technical levels to watch

A follow-through recovery is likely to confront fresh supply near the 0.7755-60 zone and any subsequent up-move might now be capped at the 200-day SMA, support turned resistance near the 0.7780 region. 

On the flip side, weakness below the 0.7720-15 area would turn the pair vulnerable to break below the 0.7700 handle and head towards testing its next major support near the 0.7665-60 region.