- The US-China trade truce-led early uptick turns out to be rather short-lived.
- Dismal Chinese PMI/RBA rate cut expectations prompt some long-unwinding.
- Traders now eye US ISM manufacturing PMI for some impetus ahead of RBA.
The AUD/USD pair now seems to have entered a bearish consolidation phase and was seen oscillating in a narrow band near the lower end of its daily trading range, just below the key 0.70 psychological mark.
The latest optimism over the US-China trade war truce turned out to be rather short-lived and the pair quickly reversed an early uptick to a near two-month high level of 0.7035 amid expectations of further monetary policy divergence between the Fed and RBA.
The positive trade-related development might have forced investors to scale back any aggressive rate cut move by the Federal Reserve in the near future, while the Australian central bank is expected to cut interest rates as early as its upcoming meeting this Tuesday.
Heading into the key event risk, the downfall could be attributed to some long-unwinding pressure, which coupled with a follow-through US Dollar short-covering move – supported by a goodish pickup in the US Treasury bond yields, further collaborated to the pair’s intraday slide of around 40-45 pips.
Moving ahead, Monday’s US economic docket – featuring the release of ISM manufacturing PMI, will be looked upon for some short-term trading opportunities, though the focus will remain on the RBA monetary policy update due to be announced during the Asian session on Tuesday.
Technical levels to watch
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