“¢ Combination of factors prompts some short-covering amid near-term oversold conditions.
“¢ The prevalent cautions mood/ongoing USD rally/fresh US-China trade tensions likely to cap gains.
The AUD/USD pair built on Friday’s late rebound from over one-month lows and is now looking to build on the momentum further beyond the 0.7100 handle.
After last week’s hefty losses, triggered by the RBA’s dovish shift, the pair regained some positive traction at the start of a new trading week, shrugging off the continuation of the recent US Dollar rally to near six-week tops.
Against the backdrop of slightly oversold conditions, a strong rally in iron ore prices in the Chinese exchange provided a minor boost to the commodity-linked Australian Dollar and prompted some short-covering move.
This coupled with some decent strength in the Chinese Yuan further underpinned the China-proxy Aussie and remained supportive of the up-move, albeit the prevalent cautions mood might keep a lid on any strong up-move.
This coupled with the prevalent cautions mood, amid renewed US-China trade tensions, might continue to boost investors’ appetite for perceived safe-haven assets and further collaborate towards capping gains.
Worries over trade disputes between the world’s two largest economies resurfaced after the US President Donald Trump confirmed that he will not meet Chinese President Xi Jinping before a March 1 tariffs deadline.
Hence, it would be prudent to wait for a strong follow-through buying before positioning for any further appreciating move as the focus remains glued to another round of US-China trade negotiations this week.
Technical levels to watch
Immediate resistance is pegged near the 0.7120 level, above which the pair is likely to aim towards testing the 0.7145-50 supply zone en-route 100-day SMA hurdle near the 0.7170 region. On the flip side, renewed selling pressure now seems to drag the pair below the 0.7060 immediate support towards challenging the key 0.70 psychological mark.
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