- Optimistic market sentiment extends some support to the higher perceived risk AUD.
- Pessimistic comments from RBA Governor Phillip Lowe limit the pair’s strong gains.
- A rally in US bond yields benefits the USD and limits the further rise.
The pair AUD/USD is extending its side consolidation price action at the start of the European session on Wednesday and remains trapped within a range, around the region 0.7615-20.
The pair has built on the modest bounce of the previous day, from the 0.7565-60 region at a six-week lows, and has moved higher during the first half of trading action on Wednesday amidst the monetary flows of risk appetite. Signs of progress towards additional stimulus measures in the US they have fueled hopes of a strong global economic recovery, which continues to support market optimism.
It is worth reporting that the Democrats in the US Congress have taken the first steps toward advancing the $ 1.9 trillion COVID-19 aid package proposed by President Joe Biden to avoid Republicans. Democrats opened the debate on a 2021 fiscal budget resolution with coronavirus aid spending instructions, unlocking a legislative tool to pass stimulus spending amid Republican opposition.
This, along with positive news about the development of another vaccine for COVID-19, has further boosted investor confidence and offered some support for the higher perceived risk Aussie. Tuesday’s news indicated that the coronavirus vaccine Sputnik V developed in Russia has shown an effectiveness rate of 91.6% in the phase 3 trial.
That said, a combination of factors has limited any significant rally for the AUD / USD pair. Expectations of increased US government indebtedness have continued to boost US Treasury yields and have benefited the US dollar.. Apart from this, pessimistic comments from RBA Governor Philip Lowe have also prevented the pair’s bulls from opening aggressive positions.
Meanwhile, the inability of the AUD / USD pair to gain significant traction favors bears and supports prospects for further weakness. This makes it prudent to wait for some solid continuation buying before confirming that the recent corrective drop from multi-year highs is over and positioning yourself for any further bullish moves.
Market participants are now awaiting the release of the US ISM Services PMI to gain some momentum at the start of the US session. Apart from this, broader market risk sentiment and US stimulus news could influence USD price dynamics. This could contribute to generating some short-term opportunities around the AUD / USD pair.
AUD / USD technical levels
.
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
