“¢ RBA’s brighter wages outlook and comfort with the current level prompts aggressive short-covering.
“¢ Positive commodity prices/softer USD provide an additional boost to the pair’s goodish recovery move.
The AUD/USD pair built on its intraday recovery from the vicinity of over two-year lows, with bulls now eyeing a move further beyond the 0.7400 handle.
After an initial fall to an intraday low level of 0.7314, the pair caught some strong bids in reaction to the RBA‘s confidence in the outlook for wage growth and comfort with the current level of the Australian Dollar. The statement, though didn’t signal any immediate rate hike move, was perceived as less dovish and prompted some aggressive short-covering move.
The bullish momentum got an additional boost from a mildly softer tone surrounding the US Dollar, which struggled to build on overnight strong gains and remained on the back-foot amid flattening of the US yield curve.
The up-move was further supported by a positive trading sentiment around commodity space, especially copper, which tends to underpin demand for commodity-linked currencies – like the Aussie.
It, however, remains to be seen if the current sharp rebound is backed by any genuine buying or would be seen as an opportunity to initiate fresh short position amid escalating trade tensions between the US and its key allies.
Technical levels to watch
On a sustained move beyond the 0.7400 handle, the pair is likely to aim towards testing the 0.7440-45 supply zone before eventually darting towards reclaiming the key 0.7500 psychological mark.
On the flip side, the 0.7370-65 area now seems to protect the immediate downside and is followed by support near the 0.7340-35 region, which if broken might turn the pair vulnerable to head back towards challenging the 0.7300 handle.
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