The AUD/USD pair rose in the early Asian session, possibly due to trade optimism between the US and China.
The break above the trend line, however, was short and the pair fell back, as the Australian Q4 inventories figure amounted to -0.2 percent quarter-on-quarter, missing the estimate of 0.3 percent growth with a large margin.
An unexpected drop in stocks indicates that GDP data for the fourth quarter may disappoint expectations, confirming the decision of the RBA to resume rate cuts.
In addition, these data overshadowed the growth of Australian housing by 28.6% in January and the growth of TD securities inflation by 0.1%.
The trendline hurdle can be scaled over the next few hours if the equities continue to cheer the increased odds of a trade deal between the US and China.
AUD/USD Technical Analysis
The Aussie dollar started a major drop from the 0.7200 swing high against the US Dollar. The AUD/USD pair broke the 0.7150 support area to move into a bearish zone.
The pair even broke the 0.7120 support and settled below the 50 hourly simple moving average. The pair traded as low as 0.7069 and it is currently correcting higher. However, there is a strong resistance near the 0.7105 level and the 50 hourly SMA.
Moreover, there is a key bearish trend line in place with resistance at 0.7100 on the hourly chart. Therefore, an upside break above the 0.7100 and 0.7105 levels is a must for a decent recovery.