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4 Aug 2021

AUD/USD seeks fresh clues to cross 0.7000 hurdle

  • AUD/USD recovery remains capped by one-month-old horizontal resistance.
  • Market sentiment improves amid stimulus hopes, slight relief in covid concerns.
  • Hawkish RBA adds to the bullish catalysts confronting recent geopolitical threats.
  • Aussie Retail Sales, China Services PMI can entertain pair traders in Asia.

AUD/USD struggles to extend the heaviest daily gains in a month, led by the RBA’s hawkish tilt, beyond the 0.7000 round-figure. That said, the Aussie pair seesaws around 0.7390 as Asian traders brace for Wednesday’s work.

The Reserve Bank of Australia (RBA) offered a positive surprise to the markets by keeping the September tapering on the table despite the covid woes at home. The same fuelled AUD/USD prices by nearly 40 pips immediately on the announcement even as the Australian central bank did reiterate the rate-hike rejection until 2024, not to forget mentioning of holding the benchmark rate and three-year yield target unchanged per market consensus.

The mildly positive mood of investors offered additional strength to the AUD/USD pair’s upside momentum as the International Monetary Fund (IMF) announced historical allocation to the Special Drawing Rights (SDRs) to battle the pandemic whereas the US Senators also sounding optimistic over President Joe Biden’s infrastructures spending plan’s passage this week.

Moody’s optimism over the Asia–Pacific region’s economic growth and softer virus-led figures for the second consecutive day was extra positives that helped the quote keep the post RBA gains.

On the contrary, firmer US Factory Orders and Middle East jitters, not to ignore Republicans’ battle lines for stimulus, challenge the pair’s upside momentum. On the same line could be the market’s cautious sentiment ahead of the week’s key events, namely Thursday’s Bank of England (BOE) meeting and Friday’s US Nonfarm Payrolls (NFP).

Against this backdrop, Wall Street benchmarks end Tuesday on a positive side while the US 10-year Treasury yields remain mostly unchanged around 1.18%.

The AUD/USD pair’s struggle to overcome the 0.7000 hurdle will seek clues from Australia’s Retail Sales data for June, likely confirming -1.8% initial forecast, as well as China’s Caixin Services PMI, prior 50.3. Following that, US ISM Services PMI for July, market consensus 60.4 versus 60.1 prior, may entertain the pair traders. Above all, covid headlines and stimulus updates could offer key directions to the pair.

Technical analysis

Multiple levels marked since early July, also challenged in August–September 2020 period, questions AUD/USD upside momentum. The resistance area draws additional strength from 21-DMA.

 

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