AUD/USD climbs to over 1-week tops, around 0.6560-70 supply zone

• AUD/USD gains traction for the second consecutive session on Tuesday.
• The USD remained on the defensive amid the prevalent risk-on mood.
• The momentum seemed unaffected by re-emergence of trade tensions.

The AUD/USD pair built on the previous day’s strong positive move and gained some follow-through traction for the second straight session on Tuesday. The uptick picked up pace in the last hour and pushed the pair to over one-week tops, around the 0.6560-70 supply zone.

The US dollar remained on the defensive amid the latest optimism over encouraging data on coronavirus vaccine trial. This coupled with some the upbeat market mood, as depicted by a positive tone surrounding the global equity markets, provided an additional boost to the perceived riskier Australian dollar.

The uptick seemed rather unaffected by Tuesday’s dovish RBA meeting minutes, which revealed that the board members were prepared to scale up bond purchases if necessary, to combat economic contraction due to the coronavirus pandemic. Bulls even shrugged off worsening US-China relations and fears about the second wave of coronavirus infections.

Meanwhile, the latest headlines that China is considering targeting Australian exports of wine, seafood, oatmeal, fruit and dairy also did little to dent the prevalent bullish sentiment surrounding the AUD/USD pair. According to Bloomberg, Chinese officials have compiled a list of potential goods to target by implementing stricter quality checks, anti-dumping probes or tariffs, or even resorting to state media usage in order to encourage consumer boycotts against Australian products.

It will now be interesting to see if the pair is able to capitalize on the momentum or once again meets with some fresh supply at higher levels. However, the fact that the pair has now found acceptance above 100-day SMA pivotal resistance supports prospects for a further near-term appreciating move.

Later during the early North American session, the US housing market data – Building Permits and Housing Starts – might influence the USD price dynamics and provide a fresh impetus. In the meantime, the broader market risk sentiment might continue to play a key role in driving the pair and produce some meaningful trading opportunities.

Technical levels to watch