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   “¢   The prevalent risk-on mood continues to prompt a follow-through USD profit-taking.
   “¢   US-China trade optimism underpins China-proxy Aussie and remained supportive.
   “¢   Traders now look forward to the US consumer inflation figures for fresh impetus.

The AUD/USD pair strengthened further beyond the 0.7100 handle and is currently placed at one-week tops, around the 0.7130-35 region.

A combination of supporting factors helped the pair to continue gaining positive traction for the second consecutive session on Wednesday and build on the overnight goodish bounce from over six-week lows.

The US Dollar remained on the defensive amid the prevalent risk-on mood, supported by news that the US lawmakers have reached a tentative budget deal to avert another partial government shutdown.

Risk sentiment improved further after the US President Donald Trump said on Tuesday that he could let the March 1 tariff deadline to slide for a while and provided an additional boost to the China-proxy Australian Dollar.

Hence, the key focus will remain this week’s high-level US-China trade talks, where the world’s two largest economies will attempt to reach a trade agreement and eventually influence investors’ appetite for riskier assets.

It would now be interesting to see if the pair is able to build on the positive momentum as market participants now look forward to the release of the latest US consumer inflation figures for some fresh impetus.  

The headline US CPI is expected to ease sharply to 1.5%y/y rate from 1.9% previous and even the slightest of disappointment would be enough to continue prompting some follow-through USD long-unwinding trade.  

Technical levels to watch

Immediate resistance is pegged near the 0.7145-50 region and is closely followed by 100-day SMA, around the 0.7165-70 region, above which the pair is likely to surpass the 0.7200 handle and test the 0.7225-30 supply zone.

On the flip side, the 0.7100 handle now becomes immediate support to defend, which if broken might turn the pair vulnerable to retest mid-0.7000s intermediate support before eventually dropping to the key 0.70 psychological mark.