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  • AUD/USD reversed a knee-jerk fall after White House advisor clarified that the US-China pact remains intact.
  • The upbeat market mood, despite fresh coronavirus concerns, further extended some support to the aussie.
  • A subdued USD demand supports prospects for a move to last week’s swing highs, around the 0.6975 region.

The AUD/USD pair had some good two-way price moves during the Asian session on Tuesday and now seems to have stabilised in the neutral territory, just above the 0.6900 mark.

The global risk sentiment took a hit on Tuesday in reaction to comments by White House trade advisor Peter Navarro, saying that the trade agreement with China has been terminated. This, in turn, prompted some aggressive selling around the China-proxy Australian dollar and dragged the AUD/USD pair to an intraday low level of 0.6857.

Later, Navarro clarified that his comments were taken out of context and the phase-one pact remained in force. The US President Donald Trump also tweeted that the agreement was “fully intact.” This, in turn, led to a sharp recovery in the global equity markets and extended some support to the perceived riskier Australian dollar.

On the other hand, the US dollar struggled to gain any meaningful traction and consolidated the overnight retracement slide from three-week tops. A subdued USD demand further contributed to the AUD/USD pair’s sharp intraday bounce of around 50 pips. However, concerns about the second wave of coronavirus infections kept a lid on any strong gains.

From a technical perspective, the AUD/USD pair now seems to have found acceptance above the 0.6900 round-figure mark and seems poised to build on the overnight strong recovery move from the 0.6800 neighbourhood. Hence, some follow-through strength towards last week’s swing high, around the 0.6975 region, now looks a distinct possibility.

Moving ahead, market participants now look forward to the flash version of the US Manufacturing and Services PMI for June. This will be followed by the release of New Home Sales data and the Richmond Manufacturing Index, which might influence the USD price dynamics and produce some short-term trading opportunities around the AUD/USD pair.

Technical levels to watch