The AUDUSD currency pair has rallied from multi-month lows as a return to the risk-on mood weighed on the US dollar. The demand for safe-haven assets faded, aiding the currency pair to recover from the previous selloff, but the upside may not be unlimited. 

Since the RBA revealed a potential rate hike pause in their April meeting, the AUDUSD currency pair has found it challenging to gain upside momentum. With the Australian monthly retail sales of 0.2% beating the 0.1% consensus, the currency pair received a further tailwind for recovery. However, the risk-sensitive pair is still vulnerable to the effects of adverse market conditions, with a dovish RBA establishing a potential upside cap. Therefore, traders may be curious as to the extent of the bullish momentum. 

Technical 

A bearish breakdown from the ascending channel formation failed its confirmation as the bulls reversed back into the channel. The currency pair is trading at a resistance level of $0.669, which threatens the possibility of a breakdown from the $0.6679 support around the 50-day moving average. The price action around this support level could be vital in determining the future directional trend. 

If support ends up holding, the bulls may continue their current risk-on rally toward $0.6698, the first potential resistance level. From there, a breakout could trigger another leg up toward $0.6727 as the bulls continue to pare the losses from the selloff. 

In the bear case, if support fails, the channel support might get retested at around $0.6667. A breakdown could signal a confirmation of the original breakout and trigger a complete retracement of the bullish run toward $0.6627.  

Summary 

With sentiment around risk being the current driver of the currency pair, the bulls might continue their run following a test of the $0.6679 support. However, if support fails, the bears could retrace the gains back toward $0.6667. 

Sources: Koyfin, Tradingview