“¢ US-China trade tensions/weaker Aussie data kept exerting downward pressure.
“¢ A subdued USD demand prompts some short-covering amid oversold conditions.
“¢ Focus shifts to Tuesday’s RBA decision and this week’s important macro releases.
The AUD/USD pair recovered early lost ground to 20-month lows and is now looking to build on its intraday momentum further beyond the 0.7200 handle.
The pair kept losing ground at the start of a new trading week and was further weighed down by a combination of negative factors. Against the backdrop of escalating US-China trade tensions, today’s unimpressive Chinese manufacturing PMI did little to lend any support to the China-proxy Australian Dollar.
Adding to this, disappointing Aussie monthly retail sales data, which were flat m/m in July, exerted some additional downward pressure and dragged the pair to an intraday low level of 0.7166, the lowest since late-December 2016.
The selling pressure now seems to have abated, at least for the time being, with a subdued US Dollar price action prompting some short-covering amid near-term oversold conditions. This coupled with a mildly positive tone around copper prices extended some support to the commodity-linked Australian Dollar and helped the pair to bounce off lows.
It, however, remains to be seen if the uptick is backed by any genuine buying or is solely led by some bearish profit-taking, especially after the recent drop of around 200-pips over the past five trading session.
Moving ahead, the latest RBA monetary policy update on Tuesday, coupled with important macro releases, including the Aussie Q2 GDP growth figures and the keenly watched US non-farm payrolls data, will now be looked upon for some fresh directional impetus.
Technical levels to watch
Any meaningful up-move beyond the 0.7200 mark is likely to confront fresh supply near the 0.7235-40 horizontal zone, above which a fresh bout of short-covering could lift the pair back towards the 0.7300 handle.
On the flip side, the 0.7165-60 region might continue to protect the immediate downside, which if broken might turn the pair vulnerable to extend the downfall further towards testing sub-0.7100 level.
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