- AUD / USD gains traction on Wednesday and moves away from Tuesday’s three-week lows.
- Risk appetite sentiment weighs on the safe-haven USD and supports the bullish move in the pair.
- The RBA’s pessimistic expectations and nervousness around the coronavirus limit any uncontrolled bullish movement in the pair.
The pair AUD/USD moves higher during the European session on Wednesday, although has struggled to capitalize on the move and remains below the 0.7100 level. At the time of writing, the pair is slightly retracing from its daily highs and remains positive around the 0.7080 region.
A combination of supporting factors has caused a short hedging move and helped the pair to bounce from the lows of more than three weeks, around the 0.7020 region established the previous day. The latest optimism about additional US fiscal stimulus measures has continued to support market optimism, which, in turn, has weighed on the safe-haven US dollar and it has benefited the higher perceived risk Australian dollar.
US President Donald Trump raised hopes of a stimulus breakthrough and said he was willing to accept a bigger aid bill despite opposition from his own Republican Party. The comments raised prospects for more government loans and prompted a sell-off in US bonds. The lack of demand for government debt put additional downward pressure on the USD and continued to support the upward movement of the AUD / USD pair.
On the economic data front, initial estimates showed that Australian retail sales fell 1.5% month-on-month in September versus a 4% drop in the previous month. The negative reading was largely offset by strong 6.8% quarterly growth figures in sales and provided an additional boost to the Aussie, helping the AUD / USD pair to break above the 50 hourly simple moving average near the region of 0.7065.
However, rising expectations that the RBA will cut interest rates in November has prevented bulls from opening aggressive positions. Additionally, concerns that a second wave of coronavirus could lead to further lockdown measures and be detrimental to the already fragile global economic recovery have helped limit the rise in the AUD / USD pair, at least for now.
This makes it prudent to wait for a solid buy to take place before confirming that the AUD / USD pair could have bottomed out in the short term and positioned for any short term bullish moves. On the other hand, bears are likely to expect a sustained break below the key psychological level of 0.7000.
AUD / USD technical levels
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Credits: Forex Street
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