AUD/USD remains vulnerable near multi-month lows, just above mid-0.7100s

• A combination of factors dragged AUD/USD lower for the fourth successive session on Thursday.
• The worsening COVID-19 situation and the risk-off mood weighed on the perceived riskier aussie.
• The Fed’s tapering plan acted as a tailwind for the greenback and also contributed to the downfall.

The AUD/USD pair maintained its heavily offered tone through the mid-European session and was last seen trading just above mid-0.7100s, or the lowest level since early November.

The pair prolonged this week's bearish breakdown momentum below the 0.7300 congestion zone and lost ground for the fourth consecutive session on Thursday. Australia suffered its worst day since the start of the pandemic amid a surge in cases infected by the highly contagious Delta variant of the coronavirus. This, along with the prevalent risk-off environment, weighed heavily on the perceived riskier aussie.

Apart from COVID-19 jitters, expectations that the Fed will begin tapering its asset purchases later this year further took its toll on the global risk sentiment. It is worth recalling that the minutes of the July 27-28 FOMC meeting released on Wednesday revealed policymakers' assessment that progress was made towards maximum employment and price stability goals. This, in turn, provided a strong lift to the US dollar.

In fact, the key USD Index surpassed the previous swing highs and shot to fresh YTD tops. This was seen as another factor that contributed to the AUD/USD pair ongoing downfall. Investors now seem convinced that the Fed is comfortable to roll back the crisis-era stimulus. The fundamental backdrop favours the USD bulls, suggesting that the path of least resistance for the AUD/USD pair remains to the downside.

That said, oversold RSI on hourly charts might hold bearish traders from placing fresh bets. Market participants now look forward to the US economic docket, featuring the releases of the Philly Fed Manufacturing Index and Initial Weekly Jobless Claims. This, along with the broader market risk sentiment, might influence the USD price dynamics and produce some short-term trading opportunities around the AUD/USD pair.

Technical levels to watch