AUD/USD consolidates below the 0.70 handle

AUD/USD is currently trading at 0.6986, between a range of 0.6950 and0.6994, up +0.39 on the session in New York following a slide in the greenback, giving back 50% of yesterday's gains. Yesterday, the USD rallied as the Fed tempered market easing expectations while risk appetite softened. The AUD/USD, is, however, on tenterhooks given the sensitivity to shifts in Fed and trade expectations.

Markets are thinking twice following Powell's statement over the number of tariffs that are currently in place which are not large enough to (directly) have an economic impact on the US economy. However, they are impacting the confidence of financial and agricultural markets and indeed yesterday's Consumer Confidence was evident of that. Moreover, in the opinions gathered in the latest round of the Beige Book, ‘trade concerns’ were mentioned twice as often as in the previous round.

"The slew of Fed speak suggested that easing is likely, but the magnitude may differ relative to the market per any one meeting," analysts at Westpac explained.

"We agree and think the Fed is more likely to move in 25bp increments rather than 50bp. To this end, any reduction in implied bets for the July meeting are more positioning related rather than trend inducing USD squeezes. We remain focused on downside momentum in the weeks to come."

Meanwhile, the outcome of the highly anticipated G20 summit on June 28-29 in Japan will set the tone for the Aussie next week. "While a trade deal would be the best outcome, the probability of such a positive scenario materialising is relatively low. After all, the trade war is not about China buying more products from the US. The main objective for the US is to protect its global dominance by undermining China’s efforts to be a driving force in such crucial sectors as technology," analysts at Rabobank argued. 

AUD/USD levels

Analysts at Commerzbank argued that AUD/USD’s outlook is near term positive:

"We would allow for a near term correction higher and a run-up to the 55-day ma at 0.6984, 0.7022 the June peak and the April peak at 0.7069. Very near term we note the 13-count on the 60-minute chart and will tighten out stops. Further up resistance can be spotted at the 0.7207 February high. A rise above the 0.7207 late February high would target the December 2018 high at 0.7394."