AUD/USD Clings to modest recovery gains, above 0.6800 handle

• Regains some positive traction on the back of upbeat Aussie macro data.
• Resurfacing US-China trade war fears likely to cap gains ahead of NFP.

The AUD/USD pair regained some positive traction on the last trading day of the week and recovered a part of the previous session’s slump to fresh multi-month lows.

The pair extended its recent sharp pullback from near three-month tops and continued losing ground for the tenth consecutive session on Thursday, falling back closer to early-Jan. flash crash lows after the US President Donald Trump announced new tariffs on more Chinese goods.

Trump announced on Thursday that his administration would impose an additional 10% tariff on the remaining $300 billion worth of Chinese imports on Sept. 1 and resurfaced fears of a full-blown US-China trade war, which exerted heavy pressure on the China-proxy Australian Dollar.

The pair slipped below the 0.6800 handle but showed some resilience at lower levels, rather caught some fresh bids following the release of upbeat Aussie macro data, showing a stronger-than-expected retail sales growth of 0.4% in June and stable PPI figures for the second quarter.

The pair was further supported by a follow-through pullback in the US Dollar, which remained on the defensive in the wake of the overnight free-fall in the US Treasury bond yields and ahead of Friday’s important release of the closely watched US monthly jobs report – NFP.

With investors looking past a hawkish rate cut by the Fed, the global flight to safety dragged the US bond yields sharply lower and prompted some aggressive USD long-unwinding trade as market participants start positioning for the next big event risk.  

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