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  • AUD/USD: Laggard now catching up with a risk-on market profile – Bulls eye 0.7259 200-DMA
  • AUD/USD has popped on risk-on markets with the US benchmarks rallying in recent trade with the S&P 500 testing the 2800 psychological level on the upside, (+ 0.12%).
  • AUD/USD is now catching up the lag in the rebound in EM assets and Chinese equities.  

AUD/USD was the laggard coming into the North American session, seriously lagging behind the risk on tone in Asian markets, dented by dollar strength reflected through USD/CNH – weighing on the Aussie.  

“Fears over Australia’s housing market have dominated recent developments, but labour market indicators suggest the RBA will be in no hurry to cut rates,” Greg Gibbs, Founder, Analyst, & PM at Amplifying Global FX Capital Pty Ltd explained, adding,  

“US real yields have fallen significantly since their peak in November last year and may reflect recent evidence of weaker economic activity. Prominent Fed members suggest the Fed may be moving to target average inflation, paving the way for lower US rates and a weaker USD outlook.”

On the margin, Powell’s first day in a two-day testimony on monetary policy today implies a soft USD tone on the margin. There is nothing there that he has communicated that is particularly troublesome for the dollar – A dirty shirt amongst the washing basket of other dirty laundries. Indeed, investors struggle to find better value elsewhere which is slowing-up the downside grind below the neckline of the DXY’s bearish H&S pattern.  

Watching Dr. Copper, trade talk progress, Chinese manufacturing  and Aussie trade

Dr Copper, a specialist on the Chinese and global economy, should not be ignored, as the price remains elevated at multi-month highs, taking its cues from expectations of a U.S. trade deal with China and increasing confidence in a global economic recovery which should be a major benefit to the Aussie.  The next cues for the Aussie, besides geopolitics, will come in Aussie trade and Chinese manufacturing.  

AUD/USD levels

“AUD/USD continues to recover and has made back the losses from the outside day to the downside on Thursday,” analysts at Commerzbank noted:

“It has held over the 0.7055/12th Feb low, and while above here scope for recovery will remain. Rallies will find initial resistance at 0.7207 and remain are likely to remain capped by the 0.7259 200 day ma. Price action in January was exhaustive – the market charted a hammer (reversal). We have a TD perfected setup on the daily chart and a 13 count on the weekly chart. This suggests the down move ended at 0.6738.”