AUD/USD clings to Aussie GDP-led gains to over 1-week tops

• A sharp USD pullback on Tuesday prompted some aggressive short-covering move.
• The up-move got an additional boost from Wednesday’s in line Aussie GDP figures.
• US-China trade uncertainties might keep a lid on any strong positive recovery move.

The AUD/USD pair continued gaining positive traction for the second consecutive session and climbed to over 1-week tops on Wednesday, albeit lacked any strong follow-through.

Upbeat Aussie GDP provides an additional boost

The pair built on the previous session’s solid rebound of over 75-pips – led by a sharp intraday US Dollar pullback from multi-year tops – and got an additional boost following the release of mostly in line Australian second-quarter gross domestic product (GDP) print, showing that the economy expanded by 0.5% quarter-on-quarter in the April to June period.
 
This against the backdrop of Tuesday’s RBA decision to maintain status-quo remained supportive of the uptick, albeit uncertainty over trade talks between the United States (US) and China kept a lid on any runaway rally for the China-proxy Australian Dollar. It is worth mentioning that reports on Tuesday suggested that the US had declined a request to delay tariffs on about $110 billion of Chinese imports that took effect over the weekend.
 
Meanwhile, the USD bulls remained on the defensive amid increasing bets for an aggressive Fed monetary policy easing, especially after Tuesday’s disappointing release of the US ISM manufacturing PMI print for August and St. Louis Fed President James Bullard’s dovish remarks – supporting a 50bps rate cut at the September FOMC meeting.
 
In absence of any major market-moving US economic releases on Wednesday, it will now be interesting to see if the pair is able to capitalize on the positive momentum or continues with its struggle to make it through the 0.6800 round figure mark as Officials in the US and China are still finding it difficult to set a schedule for trade negotiations.

Technical levels to watch