AUD/USD extends correction from 20-month highs, around 0.7350
|- AUD/USD loses steam as the US dollar tries to recover ground.
- Risk-on market mood cushions the downside in aussie.
- Eyes on US data, RBA decision and Sino-Australian updates.
The AUD/USD pair holds the lower ground near mid-0.7350s, extending the corrective decline in early European trading.
The spot witnessed good two-way businesses so far this Monday, initially extending last week’s bullish momentum to clinch fresh multi-month highs at 0.7382 amid broad-based US weakness.
Last week’s dovish narrative thrown in by the US Federal Reserve (Fed) Chair Jerome Powell continued to weigh negatively on the greenback. Powell’s new monetary policy framework fuelled expectations of a prolonged period of low-interest rates.
Dovish Fed expectations and coronavirus vaccine hopes boosted the Asian stocks while stronger-than-expected official Chinese Manufacturing and Services PMIs also added to the optimism, underpinning the higher-yielding aussie.
The gains in the major, however, were short-lived, as the sellers returned amid a profit-taking spree after the price surged to the highest since December 2018. Also, a minor bounce seen in the US dollar against its main peers collaborated with the retracement.
Investors also weighed in the tensions between Australian and its biggest trading partner, China, after Beijing launched an anti-subsidy investigation on some wine imports from Australia.
Looking ahead, markets await the US macro releases and the Reserve Bank of Australia (RBA) policy decision for the next direction in the prices.
AUD/USD Technical levels
The bears now look to test the 5-DMA at 0.7315, below which the 0.7300 level could be tested. To the upside, a clearance of the 0.7382 hurdle, the confluence of 20-month high and daily R2 will pave the way towards 0.7400.
AUD/USD Additional levels
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