Search ForexCrunch
  • AUD/USD bulls catch a breather around 5-day high after witnessing heavy gains in the second quarter (Q2).
  • Gains in equities, commodities supersede virus woes, fresh US-China tension.
  • Second-tier Aussie data, China Caixin Manufacturing PMI in focus.

AUD/USD stays firm at 0.6905 at the start of Wednesday’s Asian session. The aussie pair recently printed a two-day winning streak, not to forget 12.5% gains of the Q2, before stepping forward for the third quarter of 2020. In doing so, the quote seems to ignore the recent virus wave 2.0 and the fears attached to its while also paying a little heed to the latest Sino-American tussle over the passage of the Hong Kong security law. The reason could be traced to the quarter-end rebalancing of equities and commodities as well as hints of further stimulus from the US.

Pandemic, politics weaken against buyers’ will…

Despite major challenges to the risks, market sentiment stood positive at the end of Tuesday and the reason is traders rushed to close the Q2 on an upbeat note. Be its surge in the US coronavirus (COVID-19) cases pushing US Fed Chair Jerome Powell towards a grim testimony or the Sino-American exchange of threats based on the Hong Kong security law, nothing could tame the optimists. Also against the pair’s rise were upbeat prints of US Consumer Confidence data and worsening virus conditions in Australia and China.

On the positive side, hints of another stimulus from US Treasury Secretary Steve Mnuchin and signals of more efforts to provide vaccine manages to please the buyers. Earlier on Tuesday, China’s official NBS Manufacturing PMI underpinned the quote despite mixed data at home.

Against this backdrop, Wall Street portrayed the best quarter since 1982 whereas the US 10-year Treasury yields also gained towards 0.70%, up over two basis points (bps) by the end of Tuesday.

Moving on, Australia’s AiG Performance of Mfg Index, Commonwealth Bank Manufacturing PMI and Building Permits will offer intermediate clues ahead of China’s June month Caixin Manufacturing PMI. While the second-tier data at home might probe buyers from further upside, Caixin Manufacturing PMI’s beat to the 50.5 forecast, versus 50.7 prior, could help the pair remain positive.

It should also be noted qualitative catalysts and the key US data, like ISM Manufacturing PMI, ADP Employment Change and FOMC minutes, might also keep the traders busy during the day.

Technical analysis

21-day SMA keeps questioning the bulls around 0.6910 while a downward sloping trend line from June 10, at 0.6925 now, adds to the upside barriers. Meanwhile, sellers are looking for entries below 0.6850. Amid all these plays, the traders’ mood remains positive unless the quote slips below 200-day SMA, at 0.6668 now.