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AUD/USD looks for fresh direction to extend the recovery amid recent challenges to risk-on

  • AUD/USD stops further upside beyond October high while waiting for fresh catalysts.
  • Calls for a stop to the Fed’s rate cut and doubts over the US-China trade deal unearthed recently.
  • A lack of major data will keep trade headlines, Fedspeak in the spotlight.

Despite rising to challenge late-October highs during the previous day, AUD/USD buyers catch a breath amid mixed fundamental signals. The Aussie pair seesaws around 0.6900 during early Wednesday morning in Asia.

Among the fresh challenges, the broad strength of the US Dollar (USD) becomes the key after upbeat ISM Non-Manufacturing Purchasing Managers Index (PMI) raised bars for the US Federal Reserve’s (Fed) further rate cuts.

Adding to the sentiment is the news from Nikkei that suggests China is standing tall in its demands concerning a complete reversal of tariff hikes prior to signing “phase one” trade deal with the United States (US). The same could also be ascertained from the tone of the Global Times Editor Hu Xijin who argued against the Financial Times (FT) report fuelling the market optimism surrounding the deal on Twitter but removed the reply afterward.

The pair surged to challenge October-end highs after the optimism surrounding the US-China trade deal propelled the quote. However, gains came under pressure following the upbeat activity numbers from the US. Further to note, markets cared little for the Reserve Bank of Australia's (RBA) monetary policy meeting as it matched wide forecasts of no change and flashed mixed signals concernign the growth/economic outlook. Investors will wait for Friday's Statement of Monetary Policy (SOMP) for further clues.

Even so, risk sentiment stands tall as the US 10-year treasury yield gain nearly seven basis points (bps) to 1.86% by the press time.

Moving forward, the lack of major data/events on the economic calendar will keep traders diverted to the trade headlines during the Asian session. It should also be noted that recently increased hopes for the hawkish Fed will highlight the Fedspeak scheduled during the later part of the day.

Technical Analysis

FXStreet Chief Analyst Valeria Bednarik holds a neutral short-term view for the Aussie while saying:

“The AUD/USD pair is neutral in the short-term and according to the 4-hour chart, as it spent the day seesawing around a now directionless 20 SMA, although holding above the 100 and 200 SMA. Technical indicators in the mentioned chart are stuck around their midlines, without clear directional strength. The pair has chances of turning bearish once below 0.6840, the immediate support, with the next relevant one being the 0.6770 price zone.

Support levels: 0.6840 0.6800 0.6770

Resistance levels: 0.6900 0.6930 0.6965”

Author

Anil Panchal

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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