AUD/USD review: Off 21-day highs, higher T-yields could hurt the AUD

• AUD/USD has backed off from the 21-day highs hit yesterday, but China's watered-down response to US tariffs could cap the downside.
• The uptick in the treasury yields could keep the AUD on the back foot.

Currently, the AUD/USD is trading at 0.7257, having hit a 21-day high of 0.7275 yesterday.

The pullback is likely associated with the overbought conditions signaled by the technical indicators on short-duration time frames and could be short-lived, as many believe that China's watered-down response to the US tariffs could keep the Trump administration from firing the next shot in the ongoing trade war.

That said, the rising treasure yields could complicate matters for the AUD. At press time, the 10-year treasury yield is located at 3.06 percent, having clocked a two-month high of 3.10 percent yesterday.

All-in-all,  it appears the pair is trapped between the easing trade concerns and higher Treasury yields.

Technically speaking, the pair has likely bottomed out at the Sept. 11 low of 0.7085, but a bull reversal would be confirmed only after the AUD has moved above the confluence of the 50-day moving average (MA) and the trendline connecting the Jan. 26 high and June 6 high, currently seen at 0.7305.

Daily chart

Resistance: 0.7305 (trendline + 50-day MA), 0.7333 (23.6% Fib R of 0.8136-0.7085), 0.7397 (100-day MA)

Support: 0.7202 (Aug. 15 low), 0.7145 (Sept. 5 low), 0.7085 (recent low)