• Better NAB business survey results prompted some short-covering move.
• A modest USD retracement/US-China trade optimism remained supportive.
The AUD/USD pair gained some positive traction on Tuesday and recovered a major part of the previous session’s downfall to over one-month lows.
The pair caught some bids and snapped four consecutive days of losing streak following the release of slightly better National Australia Bank (NAB) survey results, showing that business confidence index improved slightly from +3 in December to +4 in January and business conditions index also rose from +2 in December to +7 in January.
Against the backdrop of some renewed US-China trade optimism, especially after White House senior counsellor Kellyanne Conway’s comments on Monday underpinned the China-proxy Australian Dollar and helped the pair to stage a goodish intraday bounce of around 30-pips from slightly oversold conditions.
The uptick remained support by a modest US Dollar retracement, though further gains remained capped amid a sharp corrective slide in the Iron ore prices, which fell around 4% on Tuesday after rocketing to multi-year highs in the previous session, and kept a lid on any runaway rally for the commodity-linked Aussie.
It would now be interesting to see if the pair is able to build on the recovery move or the uptick is seen as an opportunity to initiate some fresh bearish positions as investors are likely to remain nervous ahead of the upcoming high-level US-China trade talks.
In the meantime, today’s scheduled speeches by several FOMC officials, including the Fed Chair Jerome Powell will now be looked upon for some meaningful impetus later during the North-American session. This coupled with this week’s important US macro data will play an important role in determining the pair’s near-term trajectory.
Technical levels to watch
Immediate resistance is pegged near the 0.7100 handle, above which a fresh bout of short-covering could lift the pair further towards 0.7145 horizontal level en-route 100-day SMA barrier near the 0.7170 region. On the flip side, the 0.7060-55 region now becomes immediate support to defend, which if broken might turn the pair vulnerable to aim towards challenging the key 0.70 psychological mark.