AUD/USD traded near flat on Wednesday despite a weaker U.S. dollar and falling Treasury yields following the May CPI report, suggesting the U.S. economic data alone wasn't enough to support the pair.

Investors holding short positions may soon be rewarded, as the pair hit a fresh two-month low of 0.6998, briefly piercing both the uptrend line from the December 18 daily low and the 61.8% Fibonacci retracement of the March 31 to May 6 rally. While the pair managed to bounce from those levels, downside risks remain firmly intact.

Commodity markets are adding to the bearish case. Gold has been trending lower since April 17, silver since May 13, and copper's broader uptrend has stalled — all of which have weighed on AUD/USD since its mid-May high. Gold and silver are now approaching their March 23 daily lows, and a break of those levels could intensify selling pressure on the pair.

From a technical standpoint, the signals remain decidedly bearish. AUD/USD is trading below the daily Ichimoku cloud and the 10-, 21-, and 55-day moving averages. Monthly RSI points to entrenched longer-term downward momentum, and June's price decline following May's monthly doji candle reinforces the negative outlook. Should the pair make a clean and sustained break below the 0.7000 support zone, the next key target would be the March monthly low.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)