AUD/USD: Looks set to regain 0.7400 on softer USD, bears not out of the woods

• AUD/USD holds onto corrective pullback from yearly low, portrayed the last two days.
• Greenback refreshed weekly lows before closing slightly up, stimulus optimism, data play their role.
• ECB was a dull affair despite being dovish, Aussie covid conditions remain grim.
• Preliminary numbers of July PMIs will direct intraday moves with eyes on next week’s FOMC.

AUD/USD picks up bids to 0.7384, printing three-day recovery from year’s low, amid early Friday morning in Asia. Although the US dollar pullback and cautious optimism in the markets helped the quote to gain the most among G10 currency, the Aussie pair stays on the way to print a fourth weekly loss amid the coronavirus concerns.

A gradually firming hope of getting US President Joe Biden’s infrastructure spending passed through the Senate joins a bit relief to the policymakers in deciding the debt ceiling seems to pave the way for the market’s somewhat brighter mood despite the covid woes.

Although US Senators pushed back the infrastructure spending vote to Monday, Democrats are too optimistic and are ready to work over the weekend to get their leader’s plan passed. On the other hand, the US Congressional Budget Office (CBO) said, per Bloomberg, “US lawmakers likely have until October or November to raise or suspend the debt limit.” This will avail the American diplomats a bit more time than the July 31 deadline when the debt limit will be $22 trillion for the last time, set in 2019.

Elsewhere, the European Central Bank (ECB) matched wide market expectations of keeping the monetary policy unchanged with dovish forward guidance, suitable to the new inflation targeting method. While the same helped the US dollar to recover early Thursday losses, the greenback couldn’t gain much against Antipodeans than the EUR.

On the contrary, Australia’s largest daily infections since September 2020 and a surprise spike in the US Jobless Claims seem to challenge the sentiment. Also, the escalating US-China tussles, amid American support to Canberra’s trade dispute with Beijing, China’s National Security Law action in Hong Kong and US ties with Taiwan, add pressure on the market’s mood and the AUD/USD prices due to its risk barometer status.

Amid these plays, Wall Street registers the least daily gains in three days whereas the US 10-year Treasury yields eased to 1.27%.

Looking forward, Commonwealth Bank (CBA) PMIs for July will be the immediate catalysts for AUD/USD ahead of the US initial activity data for the said month. It should be noted that RBA Governor Philip Lowe was to speak around 22:45 GMT of Thursday, Friday for Asia, but the event was postponed by the organizers, due to the covid outbreak, to unspecified time and hence it becomes a surprise. Even so, the quote remains on the bear’s table as the Delta covid variant has started fueling the death toll.

Technical analysis

Short-term AUD/USD buyers remain hopeful until the quote stays above tops marked in September and November 2020, around 0.7340–45. However, early July lows and highs marked during August 2020 offer nearby key resistance around 0.7415. Hence, an area between 0.7340 and 0.7415 seems to restrict the pair’s nearby moves.