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  • AUD/USD consolidates from a 25-month high before attempting a bounce off 0.7360.
  • US dollar pullback, on the back of strong ISM Manufacturing PMI, plays a major role.
  • Equities, gold also remain on the front foot.
  • Aussie GDP can print the record GDP contraction, trade war with China and virus updates are also the key.

AUD/USD seems fading strength while taking rounds to 0.7375 at the start of Wednesday’s Australian session. The quote’s retracement from the multi-month high above 0.7400 eased from 0.7360 while offering no major gains/losses the previous day. While the lower high formation and the gradual weakness challenge the pair bulls, traders await the second quarter (Q2) Aussie Gross Domestic Product (GDP) data for fresh direction.

Is USD the only catalyst?

While looking at the Aussie pair’s latest weakness from the highest since August 2018, coupled with the bounce off 28-month by the US dollar index (DXY), market players may argue that the greenback performance is the only catalyst to determine near-term Aussie moves. The quote failed to respect to upbeat statistics like Aussie PMIs and the same from China, while also disrespecting gains by Wall Street and Gold, as the US currency recovered from the multi-month low on the back of notably strong US ISM Manufacturing PMI. It’s worth mentioning that the RBA left monetary policy unchanged, as widely anticipated, while staying ready to act if needed.

Other than the US dollar moves, China’s latest trade-punitive announcements for Canberra also weigh on the pair. On Tuesday, China’s Commerce Ministry announced it halted the imports of barley from the Australian firm CBH Grain after citing harmful insects in the imports from Australia’s largest exporter of grain products. Beijing earlier suspended the imports of beef from Australian firm John Dee Warwick and opened an anti-dumping probe on Aussie wines.

Elsewhere, the US policymakers keep jostling over the coronavirus (COVID-19) aid package as Republicans don’t want to agree on the huge Democratic demand and vice-versa.

Against this backdrop, the US 10-year Treasury yields dropped two basis points (bps) to 0.672% whereas Wall Street marked welcome prints with S&P 500 refreshing record run-up and Nasdaq gaining over 1.0% by the end of Tuesday’s trading.

Looking forward, the pair traders may keep eyes on the qualitative risk catalysts ahead of the Aussie Q2 GDP. With the forecasts suggest a 6.0% QoQ drop in the GDP versus -0.3% prior, any positive surprise may help the quote to regain 0.7400.

Technical analysis

The pair is taking a U-turn from a six-month-old ascending trend line, at 0.7420 now, which in turn suggests further weakness towards January 2019 top surrounding 0.7300. Meanwhile, the July 2018 peak near 0.7485 can please the bulls past-0.7420.

 

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