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  • AUD/USD fades pullback from 0.7264 after marking another failure to cross 0.7340 on D1 closing.
  • DXY rebounds from a 12-week low as US PMIs performed better than EU data in November.
  • Market sentiment stays mixed amid vaccine hopes, chatters concerning US-China tussle and American stimulus deadlock.
  • Australia’s preliminary Trade Balance for October, RBA’s Debelle can offer immediate direction.

AUD/USD struggles to extend the latest bounce off 0.7264 while taking rounds to 0.7285 at the start of Tuesday’s Asian session. The aussie pair surged to the fresh highs since September 02 earlier on Monday, before closing the day with another failure to cross the monthly top near 0.7340 on the daily (D1) chart. While the coronavirus (COVID-19) vaccine hopes offered an initial lift to the quote, the US dollar strength and challenges to the risks seems to have weighed on the pair afterward.

Risks remain on the table…

Although the covid vaccine/treatments have recently conveyed upbeat results of final stage trials and are up for government authorization, trading sentiment has many hurdles before regaining the pre-pandemic status. Among them, worsening virus conditions and uncertainty surrounding the US stimulus have been the major catalysts.

US hospitalizations keep surging since November 10 even if the new infections have slowed down off-late. With the same conditions in the UK and Europe, countries like France and Britain have already hinted at plans to ease activity restrictions during year-end celebrations. On the other hand, AstraZeneca’s smaller dosage vaccines got a 90% effective rate and joined the league of Pfizer and Moderna to keep the hope of battling the deadly virus with more conviction. Though, the cures will take time to reach the shelves and hence keep the traders cautious till then.

Elsewhere, the US is forming a Western alliance to battle China’s recently formed trade group. The moves can intensify the Sino-American tension, especially hurting the Aussie economy, as Beijing has recently stated punishing Canberra for their earlier support to the US-led investigation into the root of COVID-19. It should also be noted that the Trump administration is known to have added four-more Chinese companies to their blacklist.

On a different note, odds favoring soft Brexit are increasing whereas the PMIs from Australia and the US have also been upbeat during their release on Monday.

Against this backdrop, Wall Street managed to close the day on the positive side, with last hour run-up, whereas the US 10-year Treasury yields also recovered 2.5 basis points (bps) to 0.85% by the end of Monday’s North American trading.

Looking forward, Australia’s October month Trade Balance, prior 5630M, could offer immediate direction as AUD/USD buyers will look for upbeat prints to regain 0.7300. Following that RBA Deputy Governor Guy Debelle will also cross the wires and can offer additional hints to forecast the pair’s moves.

Technical analysis

A short-term ascending triangle formation currently restricts AUD/USD moves between 0.7270 and 0.7340. Also acting as extra filters to the moves is the mid-September high of 0.7346 and 100-bar SMA near 0.7340. Considering the latest bearish signals from the MACD, coupled with repeated failures to provide a daily closing beyond the monthly high of 0.7340, bulls should wait for a clear break above 0.7346.

 

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