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  • The overnight dismal US data-led bounce lacked any strong follow-through buying.
  • Tuesday’s dovish RBA statement largely offset the recent US-China trade optimism.
  • A pickup in the US bond yields underpinned the USD and exerted some pressure.

The AUD/USD pair failed to capitalize on the Asian session uptick and dropped to fresh session lows, just below the 0.6700 handle in the last hour.
 
The pair initially ticked higher and built on the previous session’s rebound from multi-year lows, supported by an intraday turnaround in the market sentiment surrounding the US Dollar following the disappointing release of US ISM Manufacturing PMI.

Bulls lacked any strong conviction

In fact, the index recorded its worst reading since June 2009 and forced investors to start pricing in a higher probability of yet another interest rate cut by the Fed in October, which weighed heavily on the Greenback and prompted some short-covering move.
 
However, a goodish pickup in the US Treasury bond yields helped the USD to stabilize a bit on Wednesday. This coupled with deteriorating the risk sentiment, amid fears of a global economic slowdown, further capped any strong gains for perceived riskier currencies – like the Aussie.
 
Given that the RBA on Tuesday showed readiness to ease further and the fact that recent optimism over a possible resolution of the prolonged US-China trade dispute had failed to provide any meaningful impetus, the pair remains vulnerable to weaken further in the near-term.
 
Moving ahead, Wednesday’s US economic docket – highlighting the release of ADP report on private-sector employment details – might influence market expectations for the official monthly jobs report and produce some short-term trading impetus later during the early North-American session.

Technical levels to watch