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  • A modest USD pullback from multi-month lows prompts some short-covering.
  • Lack of progress in the US-China trade talks seemed to cap attempted recovery.
  • Wednesday’s key focus will remain on Powell’s testimony and FOMC minutes.

The AUD/USD pair quickly reversed an early European session dip to fresh 2-1/2 week lows and is currently placed at the top end of its daily trading range, around the 0.6925-30 region.

The pair stalled its recent downward trajectory and managed to find some support ahead of the 0.6900 handle in the wake of a modest US Dollar pullback from multi-week tops. Despite the fact that investors continue to scale back expectations for aggressive Fed rate cuts and a strong follow-through upsurge in the US Treasury bond yields, the greenback lost some upside momentum and was seen as one of the key factors behind the pair’s intraday rebound.

The uptick, however, lacked any strong follow-through as investors still seemed to refrain from buying the China-proxy Australian Dollar amid fading optimism over an early resolution to the prolonged US-China trade disputes. Hence, the bounce over the past hour or so could still be categorized as corrective in nature and attributed to some short-covering move ahead of Wednesday’s key event risks.  

All eyes remain glued to the Fed Chair Jerome Powell’s two-day semiannual testimony before the Congress, starting this Wednesday, which followed by the release of June FOMC meeting minutes will be closely scrutinized for fresh clues over the central bank’s near-term monetary policy outlook and eventually help determine the pair’s next leg of a directional move.  

Technical levels to watch