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  • AUD/USD bulls catch a breather around 0.7235-50 following its run-up to fresh high in 18.5 months.
  • US dollar weakness propelled commodities and Antipodeans, equity gains add strength to the upside momentum.
  • Virus cases in Australia’s Victoria drop to the lowest in a month, US opposition Democratic Party hints breaking stimulus deadlock.
  • Australia’s Westpac Leading Index will decorate the calendar in Asia, risk catalysts are the key.

AUD/USD wavers around 0.7250 following its recovery moves from 0.7215 at the start of Wednesday’s Asian session. The aussie pair surged to 0.7265, the highest since February 2018, during the late-US session the previous day. However, consolidation in trading positions near the multi-day high pulled the pair back to the early-month tops afterward.

While analyzing the reasons for the quote’s north-run to 0.7265, it becomes clear that the US dollar weakness joins S&P 500’s intraday high to please the bulls. Additionally, receding coronavirus (COVID-19) cases in Victoria precedes US House Speaker Nancy Pelosi’s readiness to cut the bill target in half to propel the risk-on sentiment.

Is it all green and happy?

The lowest numbers of pandemic cases in the domestic epicenter, 222 new cases, supersedes the news that the city of Sydney was added to the New South Wales (NSW) hotspots. The news also overtook RBA meeting minutes that clarified the policymakers’ “wait and watch” approach with a dovish outlook and fears of the deadly virus.

On the other hand, US housing numbers, namely the Building Permits and Housing Starts, came in better than forecast to join the recently positive macros from the world’s largest economy. Following that, US House Speaker Pelosi said, “We’re willing to cut our bill in half to meet the needs right now. We’ll take it up again in January. We’ll see them again in January. But for now, we can cut the bill in half.” The news boosted the odds of breaking America’s stimulus deadlock that pushed policymakers to take a month-long vacation last week.

Alternatively, US President Donald Trump recently said he postponed talks with China and doesn’t want to speak with the nation for now. This again highlights the Sino-American tussle and weigh on the risk-tone sentiment amid the initial Asian session. Also challenging the optimism is the recently increasing virus figures from Europe, which in turn suggests the return of lockdowns and/or a brake to easing the lockdown restrictions.

Against this backdrop, the US dollar index (DXY) dropped the fresh low since May 2018 whereas Wall Street benchmarks closed in mixed. Notable among them was S&P 500’s intraday high. Even so, the US 10-year Treasury yields dropped 1.3 basis points to settle around 0.67% by the end of Tuesday’s trading. Moreover, gold prices also pierce $2,000 to extend the latest run-up while recovering the earlier losses from the record high.

Considering the aforementioned data/events, it becomes clear that the virus-led pessimism is still strong enough to rattle the market moves and hence the bulls need to stay cautious. However, an absence of major catalysts may help them continue for a while. Even so, today’s Westpac Leading Index at home, prior 0.44%, can offer intermediate direction.

Technical analysis

Having breached February 2019 month top, AUD/USD prices are all set to challenge the previous year’s peak surrounding 0.7300. On the contrary, 0.7190 and 21-day SMA near 0.7165 can offer immediate supports.