AUD/USD: Fades pullback from one month low ahead of Aussie Retail Sales

• AUD/USD bounces from 0.7019, the lowest in one month, couldn’t exceed 0.7073, prices battle with four-month-old support line.
• Mixed headlines concerning the US stimulus offered a breathing space to the sellers called by RBA minutes.
• US dollar weakness, a light calendar may join the line of positive catalysts.
• Aussie Retail Sales can trigger consolidation of recent losses unless risk-off dominates, as widely anticipated.

AUD/USD nurse recent losses around 0.7050 at the start of Wednesday’s Asian session. The pair dropped to the lowest since September 25 the previous day before bouncing off 0.7019. While cautious optimism concerning the US coronavirus (COVID-19) stimulus favored traders to nurse the losses led by RBA minutes, fears of the wider wave 2.0 and no final announcement of the American package by the previously hailed deadline keep the bulls chained. Other than the risk catalysts, the preliminary reading of Australia’s September month Retail Sales will also be the key to watch.

US stimulus talks again extended…

Despite conveying optimism for the much-awaited relief package deal, US House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin failed to reach on virus aid agreement by the end of the 48-hour time limit cheered earlier by Democrat Pelosi. Recently a spokesperson for Pelosi said, “Both sides are serious about finding a compromise and moved closer to the agreement.” The update also mentioned that the negotiations will continue on Wednesday. Before a few minutes, White House Chief of Staff Mark Meadows blamed House Speaker Pelosi for the delay in the talks as she sticks to $2.2 to $2.4 trillion demand.

Earlier on Tuesday, RBA minutes provided additional strength to AUD/USD while citing the possibilities of pushing the targets for the cash rate and the 3-year yield towards zero. The moves were strong enough to drag the pair to a one-month low before the US-session recovery that mainly took clues from the broad US dollar weakness amid mild hopes of the stimulus bundle from the American Congress. It’s worth mentioning that improvement in the US housing numbers, recently in the Housing Starts and Building Permits that followed previous positive prints of the NAHB Housing Market Index, also favored the market’s cautious optimism. Furthermore, no rate change for the sixth consecutive month by the People’s Bank of China (PBOC) could also be considered as a distant positive for the pair.

Against this backdrop, Wall Street benchmarks managed to close with soft gains whereas the US 10-year Treasury yields gained 2.4 basis points (bps) to 0.786% at the end of Tuesday’s North American session.

Looking forward, Australia’s Westpac Leading Index and the preliminary reading of Retail Sales for September can offer immediate direction to the AUD/USD prices as stimulus talks have been pushed back by one more day. Although the shift in the market mood can gain momentum from the scheduled releases and may extend the bounce off multi-day low, virus woes stand tall to challenge the bulls.

Technical analysis

While an ascending trend line from mid-June can keep jostling with the bears near 0.7045/50, the 100-day SMA level of 0.7101 holds the key for the bulls’ entries. Also acting as the key downside support is the previous month’s bottom surrounding the 0.7000 threshold.