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  • AUD/USD struggles around the intraday low amid mixed data and sustained US dollar strength.
  • Australia’s Trade Balance slipped below 5400M initial forecast to 4607M in July, China’s Caixin Services PMI rose to 54.00 versus 50.4 expected.
  • Risk reset, Sino-American tension adds extra downside pressure on the quote.
  • US dollar index prints a three-day winning streak after bouncing off a 28-month low.

AUD/USD remains on the back foot around 0.7320 during the early Thursday. The quote initially recovered towards 0.7334 but downbeat data from Australia and China keep pleasing the bears while flashing a three-day losing streak. Swing in the market sentiment and the US dollar gains are an extra burden on the quote.

Mixed data, US dollar gains are the key…

Australia’s July month Trade Balance marked yet another fundamental disappointment for the Aussie policymakers while declining below 5400M flash forecasts and 8202M prior. Details suggest that the Imports rose past-1.0% to 7.0% while Exports slumped to -4.0% from +3.0% prior.

Read: Aussie July Trade Balance surplus arrives below estimates, weighs on AUD

On the other hand, China’s Caixin Services PMI rose to 54.00 versus 50.4 expected and 54.1 prior during the month of August. The same pushes the composite PMI data to 55.1 versus 54.5 prior.

Read: Chinese Aug Caixin Services PMI 54.0 vs 54.1 prior

Following the mixed data, the Aussie pair extends its southward trajectory for the third day in a row.

Other than the economics, the market’s risk reset and the US dollar’s sustained recovery also negatively affect the AUD/USD prices. The US dollar index (DXY) gains 0.18% while rising for the third day following its U-turn from 91.74.

Among the risk barometers, the S&P 500 Futures ease from the record top of 3,586.38 flashed the previous day to 3,573, down 0.15%, whereas the US 10-year Treasury yields seesaw around 0.65% after flashing losses the previous day. Additionally, stocks in Asia-Pacific remain mostly positive except for mild losses in China.

While increasing odds of further stimulus, be it monetary or fiscal, keeps the global equities high, coupled with the hopes of the coronavirus (COVID-19) vaccine, the Sino-American tussle questions the risk-on mood. Recently, US Secretary of State Mike Pompeo announced further sanctions on the Chinese diplomats that Beijing’s embassy in America criticized harshly. Elsewhere, AstraZeneca continues its final trials for the virus vaccine whereas global policymakers, around 76 wealthy countries, form join to ease the access of vaccine developments and distribution.

It should be noted that the market’s cautious sentiment ahead of Friday’s US Nonfarm Payrolls, not to forget today’s ISM Services PMI, also negatively weigh on the pair. Should the upcoming American economics print downbeat figures, the US dollar may fade the recent upside momentum. However, risk-catalysts will be the key follow.

Technical analysis

A one-month-old ascending trend line, at 0.7310 now, offers immediate support ahead of the year 2019 top surrounding 0.7300 and the early August highs surrounding 0.7280/75. Meanwhile, bulls are less likely to enter unless AUD/USD prices cross a six-month-old resistance line that currently stands near 0.7415.


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