AUD/USD sticks to weaker Aussie data-led weakness, now eyeing 0.7100 mark

   •  Weaker Aussie trade surplus data prompts some selling on Tuesday.
   •  Modest USD rebound/rising US bond yields further add to the pressure.
   •  Downside seems limited ahead of Wednesday’s FOMC meeting minutes.

The AUD/USD pair traded with a mild negative bias through the Asian session on Tuesday and is currently placed at the lower end of its daily trading range, around the 0.7130-25 region.

A combination of supporting factors - persistent US Dollar selling bias and renewed US-China trade optimism, assisted the pair to build on last week's strong rebound from almost a decade low and climb to two-week tops on the first trading day of the week. 

The up-move, however, lacked any follow-through, rather started losing steam on Tuesday after the Australian Bureau of Statistics (ABS) reported a weaker trade surplus of A$ 1,925 million in November as compared to A$2,230 million consensus estimates.

The pair now seems to have snapped three consecutive days of winning streak and was further weighed down by a modest USD rebound from the weakest level since mid-October, this time supported by strong follow-through pickup in the US Treasury bond yields.  

Meanwhile, growing market bets that the Fed will adopt a slower pace of rate increases, or perhaps even pause the tightening cycle in 2019 might now keep a lid on any runaway rally for the greenback and thus, help limit any meaningful downside for the major. 

Moving ahead, the release of the latest FOMC meeting minutes on Wednesday, followed by the Fed Chair Jerome Powell's scheduled speech a day after will play an important role in driving sentiment surrounding the buck and eventually provide a meaningful directional impetus.

Technical levels to watch