AUD/USD: Consolidates heaviest gains in two weeks above 0.7100 amid cautious optimism
|- AUD/USD eases from weekly high of 0.7137 marked on Wednesday.
- Risk barometers retrace gains initially backed by US stimulus hopes, Brexit optimism, US dollar index drops to seven-week low.
- Virus woes, dovish tone of Fed’s Bullard also probe the optimists.
- RBA’s Debelle, NAB Business Confidence will offer immediate direction, risk news remain as the main driver.
AUD/USD drops to 0.7110 at the start of Thursday’s Asian session. In doing so, the aussie bulls catch a breather after posting the biggest gains since October 09 while also step back from the highest levels seen last Thursday. Although reassessment of the US coronavirus (COVID-19) stimulus hopes and fears of a wider COVID-19 wave 2.0 in Europe recently probed the risk-on mood, the US dollar’s decline to the multi-day low keeps the pair buyers hopeful ahead of a second-tier data/events.
Virus woes, downbeat Fed battle expectations of US relief package, Brexit deal…
US Congress members are hopeful of a virus aid package, despite the hardships of getting it approved before the election. Not only the Trump administration members that have pushed for sooner checks but Democrats are also flashing upbeat signals of a deal. Recently, the White House Chief of Staff Mark Meadows conveyed his optimism whereas spokesman for US House Speaker Nancy Pelosi, also a senior democrat and the key negotiator, signaled talks are getting closer to the law. Though, Senate Republican Leader Mitch McConnell isn’t ready to respect US President Donald Trump’s pressure for a quick agreement.
Elsewhere, Brexit talks between the European Union (EU) and the UK are set to resume after Britain demanded the bloc’s seriousness before starting the new round during the last weekend. Though, thorny issues may keep the policymakers jostling ahead of the cheered deadline of mid-November.
On the contrary, Spain marked a million cases of the deadly virus the previous day whereas 26 out of 50 US states have reported record daily increases in new cases so far in October. Even so, St. Louis Federal Reserve Bank President James Bullard pours cold water on the hopes of further negative rates while also saying, “could wait until q1 2021 to assess the need for further fiscal stimulus.”
Against this backdrop, Wall Street closed with mild losses after the initial run-up whereas the US 10-year Treasury yields gained 2.8 basis points by the end of Wednesday’s trading.
Moving on, AUD/USD traders will keep eyes on the comments from the RBA Deputy Governor Guy Debelle for immediate direction whereas National Australia Bank’s Business Confidence Index for the third quarter (Q3), previous -15, will also be the key to watch. Though, major attention will be given to the risk catalyst.
Technical analysis
Bulls’ return from a brief drop below the key support line stretched from June 15 requires a clear break above 21-day and 50-day EMAs, respectively near 0.7140 and 0.7150, to attack a trend line from September 01, at 0.7197 now. However, this doesn’t allow the bears to enter unless AUD/USD prices drop below September month’s low around the 0.7000 threshold.
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