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  • The USD remains supported by rising US bond yields and exerts some pressure.
  • US-China trade optimism extends some support and helped limit the downside.
  • All eyes remain glued to US-China trade talks, Wednesday’s FOMC policy decision.

The AUD/USD pair extended its sideways move on Tuesday and remained confined in a narrow trading band around the 0.6900 handle, or over one-month lows.

After the recent sharp pullback of nearly 200-pips from the 0.7100 neighbourhood, or three-month tops, the pair now seems to have entered a bearish consolidation phase as investors seemed reluctant to place any aggressive bets ahead of this week’s important event risks.  

With investors awaiting the outcome of the highly anticipated FOMC monetary policy decision on Wednesday, the US Dollar stood tall near two-month tops amid a pickup in the US Treasury bond yields and was seen exerting some downward pressure on the major.

However, renewed optimism over a possible resolution to the prolonged US-China trade disputes, ahead of the high-level trade negotiations, extended some support to the China-proxy Australian Dollar and helped limit the downside, at least for the time being.

Hence, it will be prudent to wait for a strong follow-through selling before positioning for any further near-term depreciating move as market participants now look forward to Tuesday’s US economic releases in order to grab some short-term trading opportunities.

Tuesday’s US economic docket features the release of Personal Income and Spending data for June, along with the core PCE price index – the Fed’s preferred inflation gauge, and the Conference Board’s Consumer Confidence Index, due later during the early North-American session.

Technical levels to watch