AUD/USD: Cheers risk-on mood above 0.6900 but upside momentum fizzles

• AUD/USD seesaws between 0.6905 and 0.6925 following its uptick to one week high of 0.6944.
• Market sentiment benefits from upbeat economics, positive news on virus vaccine despite surging COVID-19 cases in the US.
• FOMC minutes reiterated readiness to act with clear forward guidance likely coming soon.
• Aussie trade balance, risk catalysts could offer immediate direction, US NFP will be the spotlight afterward.

AUD/USD takes rounds to 0.6915 at the start of Thursday’s Asian session. In doing so, the aussie pair prints a four-day winning streak while trading near the one week high flashed before a few hours. Though, the quote has been keeping a short range of nearly 20 pips ever since it stepped back from 0.6944.

Virus woes, Sino-American tension fails to tame the bulls…

Despite growing concerns about the worsening coronavirus (COVID-19) conditions in the US, especially in California and Texas, global markets remained mostly upbeat during Wednesday. The reason could be traced from the upbeat prints of PMIs from China, the US and Europe. Also supporting the optimism could be the news from pharma companies like Pfizer and the biotech firm BioNTech suggesting positive trial results of a vaccine. Furthermore, the minutes of the latest Federal Reserve meeting also refrained from uttering anything more worrisome and silently favored the risk-on mood.

On the negative side, the US and China continue to remain at loggerheads with Trump administration progressing sanctions on the later due to its Hong Kong security law. Further, New Delhi-Beijing tussle and the recent push by the US House Speaker Nancy Pelosi to levy sanctions on Russia also guard the optimism.

Against this backdrop, Wall Street benchmarks closed the day with mixed signals whereas the US 10-year Treasury yields gained 2.3 basis points to .676% at the end of Wednesday.

While the qualitative risk catalysts are likely to keep the driver’s seat, Australia’s May month trade figures will offer immediate direction to the pair. “We expect another healthy trade surplus in May of A$8b thanks to robust iron ore exports (volumes +5% and prices +12%) while we expect an easing in lockdown measures likely to drive a normalization in goods imports. Supporting a firmer surplus is the likelihood that service imports are soft in light of travel restrictions,” says TD Securities.

During the US session, June month employment data will be the key to watch. The US Bureau of Labor Statistics will release the data today at 12:30 GMT, rather than the general Friday release. Forecasts suggest a notable recovery in the headlines Nonfarm Payrolls (NFP) from 2,509K prior to 3,000K.

Read: US Non-Farm Payrolls June Preview: The delicate art of prediction

Technical analysis

With a clear break above a three-week-old falling trend line, AUD/USD prices are likely to rise further towards 0.6975 and 0.7000 numbers to the north. However, RSI conditions might question the bulls afterward. On the downside, the pair’s declines below 0.6900 could recall sellers targeting 0.6860 support confluence including 21-day EMA and an ascending trend line from June 15.