- AUD/USD extends pullback from 0.7112 but stays shy of Tuesday’s top 0.7177.
- Risk-tone sours amid virus woes, uncertainty surrounding US fiscal package.
- Fed announced extension of lending facilities from September to December.
- Aussie Q2 CPI, risk catalysts can entertain traders ahead of the Fed decision.
AUD/USD trades around 0.7155 at the start of Wednesday’s Asian session. The aussie pair eased the previous day but stood close to the highest since April 2019, flashed on Monday. The resulted moves could be traced to the US dollar’s pullback from near two years’ bottom ahead of the key Federal Reserve monetary policy. However, risk catalysts played their role to tame the greenback’s bounce and keep the pair afloat.
US dollar fails to recall buyers…
Despite bouncing off the lowest since 2018, the US currency fails to recall the bulls as traders doubt the American policymakers will be able to sign the much-awaited phase 4 coronavirus bill (fiscal package). The latest updates from the US House Speaker Nancy Pelosi confirms the market expectations that both the parties, namely the ruling Republicans and the opposition Democrats, are far in the reaching any deal.
This joins the worries concerning the coronavirus (COIVD-19) resurgence. The US President Donald Trump recently crossed wires while pitching for the deal with Kodal pharmaceuticals and renewing hopes of a vaccine.
Elsewhere, the US-China tussle and mixed economics from America offers not a happening day despite the Federal Reserve’s (Fed) extension of lending facilities that were scheduled to expire on or around September 30th through December 31st.
Against this backdrop, market sentiment sours with Wall Street stepping back from the recent positive trajectory while the US 10-year Treasury yields revisiting the sub-0.60% region.
Looking forward, the second quarter (Q2) Consumer Price Index (CPI) from Australia becomes the immediate catalyst for the pair. The headline CPI is expected to slump from +0.3% to -2.0% whereas the RBA Trimmed Mean CPI may recede from 0.5% to 0.1% quarterly. Even is the numbers are likely to be dismal, the AUD/USD prices may cheer the US dollar weakness, except for a mild pullback in a case where actual figures meet forecasts. On the contrary, upbeat data will help the quote to again confront 0.7200. However, the pre-Fed trading lull could disappoint the momentum lovers.
Technical analysis
Unless declining below 0.7065/60 support-zone, comprising Friday’s bottom and June month’s top, buyers are less likely to forget targeting 0.7200 threshold. Though, the pair’s further upside depends upon how well it can cross 0.7210 before targeting February 2019 top surrounding 0.7300.
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