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  • AUD/USD gained traction for the second consecutive session on Tuesday amid softer USD.
  • Improving risk sentiment weighed on the USD’s safe-haven status and remained supportive.
  •  The pair had a rather muted reaction to the latest RBA monetary policy update on Tuesday.
  • A US-China spat over the origin of the coronavirus might keep a lid on any meaningful gains.

The AUD/USD pair edged higher through the Asian session and is currently placed near the top end of its daily trading range, just above mid-0.6400s.

The pair built on the previous session’s intraday bounce from one-week lows and gained some follow-through traction for the second consecutive session on Tuesday amid a turnaround in the global risk sentiment.

As governments started easing coronavirus-induced lockdowns, investors started pricing in the idea that the worst might already be over and that things are improving. This, in turn, boosted investors’ confidence.

The upbeat mood was evident from a positive tone around the global equity markets, which undermined the US dollar’s safe-haven status and turned out to be a key factor that benefitted perceived riskier currencies, like the aussie.

Meanwhile, the pair had a rather muted reaction to the latest monetary policy update by the Reserve Bank of Australia (RBA), wherein the central bank left its monetary policy settings unchanged as was widely expected, 

It will now be interesting to see if the pair is able to capitalize on the positive move or runs into some fresh supply at higher levels amid concerns over a US-China spat over the origin of the coronavirus pandemic.

This coupled with the US President Donald Trump’s threat to impose fresh tariffs on China in retaliation to the mishandling of the coronavirus outbreak might keep a lid on any strong gains for the China-proxy Australian dollar.

Moving ahead, market participants now look forward to the US economic docket, highlighting the release of the ISM Non-Manufacturing PMI. The data might influence the USD price dynamics and produce some short-term trading opportunities.

Technical levels to watch