AUD/USD clings to 50-DMA as risk-on sentiment fades

• AUD/USD refrains from further advances as recent risk-on seems to fade.
• A lack of fresh catalysts also limits the pair’s moves.
• Australia’s Westpac Consumer Confidence and China’s M2 Money Supply, New Loans can entertain traders, US-China trade headlines will keep the hotspot.

Considering the recent weakness in the market’s optimism, the AUD/USD pair clings to 50-day simple moving average (DMA) while taking rounds to 0.6860 during Wednesday morning in Asia.

The board risk-on rally seems to have lost momentum as a lack of major catalysts on the US-China trade future and a bit less-tensed global political situation are playing their role.

Following upbeat signs of sooner trade talks with China, there hasn’t been much to cheer, except the latest positive statement from Chinese Premier Li. On the contrary, disappointing factory-gate inflation data from the dragon nation have questioned the markets’ risk sentiment off-late.

It should also be noted that China’s downbeat Producer Price Index (PPI) and mild outcome of the US data also contribute to the investors’ perception.

At the political front, the US President Donald Trump removed his National Security Adviser John Bolton, who had quite a hard stand against the Middle East, North Korea and China. Also, calls of the American Senators’ letter to the President to safeguard the national technologies from China while checking on Hong Kong also raised doubts on east talks between the US and China when they meet on the trade negotiation table during early October.

Elsewhere, Iran and Turkey keep being the in the spotlight due to their tussle with the US while North Korea fails to grab market attention despite news that latest large missile tests were conducted under the supervision of Kim Jong-Un. Further, uncertainty surrounding Brexit prevails even if the British Parliament is prorogued till October 14.

Even so, the US 10-year treasury yields remain positive around the one-month top near 1.75% while the Wall Street registered mixed moves.

Moving on, September month Westpac Consumer Confidence from Australia and China’s M2 Money Supply, New Loans data for August could decorate Asian economic calendar, which in turn supports a lack of momentum going forward unless trade/political headlines flash any big surprises. "Consumer Sentiment rose 3.6% in Aug to the long term average with all sub-components registered gains on the month. The largest gains we seen for the Economy 1yr ahead, +9.6% and Expectations +4.7%. Our guess is that the tax offset, and the rise in property prices may have helped boost sentiment. Such an outcome should be positive for retail sales," says TD Securities.

Technical Analysis

With the Doji candlestick formation on the daily chart, prices are likely to register a pullback towards revisiting June month low of 0.6830 and early-August tops surrounding 0.6820. However, the 21-DMA level of 0.6780 could restrict further declines. On the upside, 100-DMA level of 0.6907 becomes crucial to watch.