|

AUD/USD: Off one-week low to regain 0.7100, eyes RBA

  • AUD/USD seesaws around 0.7120-32 after recovering from 0.7075.
  • US dollar recovery, worsening coronavirus conditions in Victoria favored short-term sellers earlier.
  • RBA widely anticipated repeating the status-quo amid pandemic, Aussie Retail Sales and Trade Balance to also entertain pair trader.
  • US stimulus talks, second-tier data and virus updates are important too.

AUD/USD takes rounds to 0.7125 at the start of Tuesday’s Asian session. The aussie pair recently pulled back from the lowest since July 24. Though, the 0.7120-32 area seems to restrict the quote’s recovery moves currently. While the US dollar’s bounce portrayed a second daily loss-making day on Monday, bears are catching a breather ahead of the key data/events from Australia.

US dollar recovery or a pullback?

Although catalysts ranging from the month-end positioning to upbeat US data favored the greenback’s gains, there are no strong clues as to the currency’s future strength. The US dollar index (DXY) stabilized around 93.50 by the end of Monday. In doing so, the greenback’s gauge versus the major currencies stretched its U-turn from the lowest since May 2018, triggered Friday.

Upbeat prints of ISM Manufacturing PMI, up 54.2 versus 53.6 forecast, rekindled expectations that the American economy is strong enough to ward off the coronavirus (COVID-19) risk. Also favoring the greenback could be the policymakers’ rush to cut the much-awaited deal on the fiscal stimulus, with the decision on unemployment claim benefits be the priority. However, the pandemic continues to pose a threat to the USD’s return whereas the Fed policymakers’ dovish outlook also poses a threat to the bulls.

On the other hand, upbeat figures from Australian PMI and TD Securities Inflation, not to forget China’s Caixin Manufacturing PMI, failed to please the bulls. The reason could be traced from worsening COVID-19 conditions in Victoria. Even if the new cases have eased from +670 to near 430, downbeat comments from Victorian Premier Daniel Andrews, suggesting further business closures, weigh on the quote. On Sunday, Victoria declared a state of disaster and imposed new lockdown measures until at least 13 September.

Against this backdrop, the market’s risk-tone remains upbeat. To portray the mood, Wall Street marked gains on Monday whereas the US 10-year Treasury yields also gained 1.8 basis points (bps) to 0.554%.

Moving on, traders will keep eyes on the RBA’s monetary policy decision and Statement of Monetary Policy (SoMP). While the policymakers are less likely to offer any surprises, the recent outbreak of the virus in Victoria might push them towards a dovish outlook, which in turn could extend the Australian dollar’s weakness.

Read: RBA Preview: COVID running a muck? An Exy Aussie? Nah, no worries mate!

Ahead of the RBA, Australia’s June month’s Retail Sales may confirm 2.4% preliminary forecast whereas Trade Balance can rise to 8,800M from 8,025M for the said month.

Technical analysis

An ascending trend line from May 22, currently around 0.7075 precedes the 0.7065/60 support-zone, comprising June 10 high and July 24 low, to restrict the pair’s near-term downside. Alternatively, bulls have to dominate past-0.7200 to regain market confidence.

Additional important levels

Overview
Today last price0.7125
Today Daily Change-18 pips
Today Daily Change %-0.25%
Today daily open0.7143
 
Trends
Daily SMA200.7051
Daily SMA500.6935
Daily SMA1000.6611
Daily SMA2000.6698
 
Levels
Previous Daily High0.7228
Previous Daily Low0.7133
Previous Weekly High0.7228
Previous Weekly Low0.7087
Previous Monthly High0.7228
Previous Monthly Low0.6876
Daily Fibonacci 38.2%0.7169
Daily Fibonacci 61.8%0.7192
Daily Pivot Point S10.7107
Daily Pivot Point S20.7072
Daily Pivot Point S30.7012
Daily Pivot Point R10.7203
Daily Pivot Point R20.7263
Daily Pivot Point R30.7298

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.

More from Anil Panchal
Share:

Editor's Picks

GBP/USD surrenders some gains, back to 1.3420

GBP/USD holds on to moderate gains above 1.3400 the figure on Friday. Optimism surrounding the UK government’s leadership transition and expectations of further BoE tightening support the British Pound, while easing tensions in the Middle East and fading Fed rate-hike expectations weigh on the US Dollar.

EUR/USD turns positive, targets 1.1450

EUR/USD now picks up pace and advances toward the 1.1440 region on Friday, up modestly for the day. With no major economic data due, lingering uncertainty over the US-Iran conflict keeps investors cautious, limiting the pair's upside.

Gold remains offered, still below $4,100

Gold struggles to extend Thursday’s rebound and navigates below the $4,100 mark per troy ounce on Friday. Uncertainty surrounding the Middle East conflict limits the precious metal’s upside, which is also under pressure amid rising US Treasury yields across the curve.

Week ahead – US CPI and Warsh testimony to take centre stage, BoC eyed too

US inflation report and Warsh testimony to headline the week. Dollar to dominate amid slew of other US data and Mideast tensions. Amid fresh Iran escalation, China GDP to shed light on Q2 impact. Bank of Canada not expected to follow RBNZ with rate hike.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June Federal Open Market Committee meeting landed mid-round-trip, describing a world that had already stopped existing.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June FOMC meeting landed mid-round-trip, describing a world that had already stopped existing.