AUD/USD bounces off 32-month lows, upside seems limited

   “¢   Upbeat Chinese PMI/positive copper prices helped stage a modest rebound.  
   “¢   Resurgent USD demand/US-China trade tensions to cap any meaningful up-move.

The AUD/USD pair recovered around 30-pips from fresh 32-month lows and is currently placed at the top end of its daily trading range, around the 0.7070 region.

Against the backdrop of an unexpected jump in the Chinese Caixin Services PMI, released earlier today, a mildly positive tone around copper prices extended some support to the commodity-linked Australian Dollar and helped the pair to once again find decent support near the 0.7040 region.

However, a combination of negative forces, namely resurgent US Dollar demand and the prevalent risk-off mood, kept a lid on any meaningful recovery amid relatively thin trading conditions on the back of a holiday in the US markets.  

With investors looking past Friday’s mixed US monthly jobs data, firming expectations for gradual Fed rate hike action through the end of this year and beyond underpinned the greenback demand. Adding to this, the prevalent risk-off mood was further seen benefitting the buck’s safe-haven status.  

This along with, resurfacing US-China trade tensions might continue to weigh on the China-proxy Australian Dollar and cap any attempted recovery move from oversold conditions, especially after the recent fall of nearly 275-pips over the past two weeks or so.

Technical levels to watch

Any subsequent up-move is likely to confront some fresh supply near the 0.7100 handle, above which a fresh bout of short-covering could lift the pair further towards 0.7145-50 supply zone. On the flip side, a sustained weakness below the 0.7040 area is likely to accelerate the slide towards challenging the key 0.70 psychological mark.