- AUD/USD marks second U-turn from 0.7220-30 area after flashing two-day winning streak.
- Broad US dollar weakness, gold price rally favor the Aussie buyers.
- Worries concerning the US-China tussle, American stimulus largely ignored.
- RBA minutes will offer more details on the central bank’s recent dovish tone.
AUD/USD seesaws around 0.7215 at the start of Tuesday’s Asian session. The pair rose during Friday and Monday but the gains of the previous day challenged a seven-day top while taking clues from the surge in the gold prices and weak US dollar. Though, the Sino-American tension, coronavirus (COVID-19) woes and uncertainty concerning the US aid package push back the buyers around 0.7220-30 off-late. Hence, traders are waiting for more clues and will observe RBA minutes closely for fresh impetus.
Bulls need to be cautious…
Although the AUD/USD pair has so far traded around 14-month high in August, challenges to the market sentiment remains don’t fade. The US policymakers dumped stimulus talks, Victoria’s death toll due to the virus surged to the record high and the souring relations between the US and China keep disturbing.
On the positive side, RBA’s readiness to act joins the run-up in gold prices, recently surged by $40 on Monday, as well as the US dollar weakness to keep the buyers hopeful. The US dollar index (DXY) dropped for the fourth consecutive day by the end of Monday while nearing the two-year low flashed on August 06.
Talking about the data, the Australian economic calendar offered nothing major on Monday while downbeat Empire State Manufacturing PMI from the US added weakness into the greenback.
Against this backdrop, Wall Street flagged mixed closing for the week’s start as America’s dislike for Chinese companies, Huawei being the latest one, joined US Senators’ refrain from solving the stimulus deadlock. Further, the US 10-year Treasury yields also dropped 1.8 basis points (bps) to 0.691% by the end of Monday’s North American session.
Looking forward, RBA minutes will be the key for the AUD/USD traders as the Aussie central bank’s latest dovish tone needs justifications. The RBA kept its benchmark unchanged while adding to Quantitative Easing (QE) in its latest meeting. The RBA Governor has recently been favoring negative rates but steps back from acting too soon. Hence, pessimism among the policymakers, if revealed, could stop the quote from rising further beyond the latest highs. However, any surprise optimism might not refrain from refreshing the 22-month top close to 0.7245.
Technical analysis
Unless crossing 0.7240-45 area, AUD/USD prices become vulnerable to revisit 0.7200 mark, a break of which will in turn drag the quote to 21-day SMA surrounding 0.7160. On the contrary, the pair’s ability to cross 0.7245 enables the bulls to attack the year 2019 top near 0.7300.
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