AUD/USD recovers early lost ground to over 1-week tops, lacks follow-through
| • A subdued USD demand/weaker US bond yields helped reverse early dip to sub-0.7100 level.
• A sharp rebound in copper prices underpinned Aussie and provided an additional boost.
• Further gains are likely to remain capped amid fears over a full-blown US-China trade war.
The AUD/USD pair managed to rebound around 35-pips from session lows and is currently holding with modest daily gains, comfortably above the 0.7100 handle.
For the second straight session, bullish traders showed some resilience below the 0.7100 handle, or over one-week lows, with a subdued US Dollar price action helping the pair to regain positive traction at the start of a new trading week.
With investors looking past last week's hawkish FOMC meeting minutes, a mildly negative tone around the US Treasury bond yields and deteriorating US-Saudi relations, following the disappearance of journalist Jamal Khashoggi, exerted some downward pressure on the greenback.
This coupled with a sharp bounce in copper prices, which tend to underpin the commodity-linked Australian Dollar, provided an additional boost and remained supportive of the pair's momentum to an intraday high level of 0.7125.
It, however, remains to be seen if the pair is able to build on the positive move or continues with its struggle to make it through the 0.7150-60 supply zone, which has been acting as a key hurdle amid prospects for a further escalation in the US-China trade tensions.
Technical levels to watch
On a sustained move beyond the mentioned barrier, the pair is likely to aim towards reclaiming the 0.7200 handle with some intermediate resistance near the 0.7175-80 region. On the flip side, the 0.7090-85 zone might continue to protect the immediate downside, which if broken might turn the pair vulnerable to break through 2-1/2 year lows support, around the 0.7050-40 region, and head towards testing the key 0.70 psychological mark.
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