AUD/USD: Steady at two-week top around 0.7300, Australia Q2 GDP eyed

AUD/USD remains sidelined around a fortnight top above 0.7300, near 0.7315 as Asia–Pacific traders brace for Wednesday’s session. In doing so, the Aussie pair begins the September month on a front foot after three consecutive months of a downside, not to forget refreshing the yearly bottom the last month.

Improvement in the coronavirus conditions at home and abroad could be cited as the major reason for AUD/USD recovery as the Oz nation witnessed easy infections after refreshing record tops in recent days. Australia’s most populous state New South Wales (NSW) prints 1,164 daily infections versus the record level of 1290 flashed on Monday, which in turn drags the national count to sub 1,300 levels.

Not only in Australia but the easy virus numbers New Zealand and the UK also weigh on the US dollar’s safe-haven demand and favor AUD/USD bulls.

In addition to the COVID-19 figures, which cut the US dollar’s safe-haven demand, increasing chatters over the European Central Bank’s (ECB) bond purchase cut, due to strong inflation data, also weighed on the greenback and propelled AUD/USD. It’s worth noting that the mixed prints of US housing and second-tier activity numbers joined the pre-NFP anxiety and downbeat consumer confidence figures to also weigh on the greenback. That said, the US Dollar Index (DXY) dropped to the lowest since August 04, becomes consolidating gains to 92.65 on Tuesday.

While cheering the positives, the AUD/USD prices ignored disappointing activity numbers from the largest customer China, not to forget paying a little heed a downbeat data at home. China’s official PMI figures for August came in quite disappointing but the Aussie economics pare losses with the mixed outcome. That said, Australia TD Securities Inflation for August rose past 0.4% (revised) to 0.5% MoM in August whereas Building Permits dropped below -6.7% previous readouts and -5.0% expected to -8.6% in July. Additionally, Australia's Current Account Balance for the second quarter eased below 21.0 billion forecast to 20. Billion.

Additionally, the recent comments from the Fed policymakers, latest by Cleveland Fed President Loretta Mester, copy Fed Chairman Jerome Powell’s cautious optimism and reject fears of a rate hike, which in turn heavy the greenback.

Against this backdrop, Wall Street closed with mild losses and the US 10-year Treasury yields snapped a two-day downtrend to add 2.3 basis points (bps) to 1.307% by the end of Tuesday’s trading.

Looking forward, AUD/USD traders will keep their eyes on Australia’s second quarter (Q2) GDP figures, expected +0.5% QoQ versus +1.8% prior. With the local lockdowns, sellers will be hopeful for a data disappointment to consolidate recent gains.

Read: Australian GDP Preview: Economy to avert a second recession

Also important will be China’s Caixin Manufacturing PMI for August, expected 50.2 versus 50.3, as well US employment-related data and ISM Manufacturing PMI for August.

Read: ISM Manufacturing PMI Preview: Why it could be the trigger for a big greenback comeback

Technical analysis

A decisive break of a three-month-old descending trend line and 20-DMA, around 0.7300–7295, enables AUD/USD bulls to aim for August month’s peak near 0.7430.