AUD/USD moves away from the 0.7000 level, but more gains are still on the table

• The AUD falls against the USD.
• The dollar is affected by lower yields in the United States after the economic data.
• AUD/USD pulls back from 0.7000, and maintains a bullish bias.

The AUD/USD marked a new daily low during the American session at 0.6954. It tries to regain momentum on the back of improving market sentiment and dollar weakness.

Between a weak dollar and… risk aversion?

Data released on Thursday showed the US economy contracted during the second quarter at an annualized rate of 0.9%, versus expectations for a 0.5% expansion. It’s the quarterly contraction in a row, so it points to the US economy slipping into a technical recession.

“Insisting on the precise definition of a recession will be an even more difficult task in light of the unequivocal deterioration in economic activity reflected in today’s 0.9% contraction in real GDP in the second quarter. However, real consumer spending has continued to advance and the job market still has steam. It’s too early to announce the end of this expansion, but the time is fast approaching,” Wells Fargo analysts said. The figures sent treasuries higher and weighed on the dollar. The US 10-year Treasury bond yield is trading at 2.66%, the lowest level since April.

After a negative open, stock prices are rising again on Wall Street, adding to yesterday’s strong gains. Initially, risk aversion gave the dollar some support, but that support quickly dissipated.

AUD/USD continues to show a bullish bias. A test of 0.7000 in the next session looks likely if it holds above 0.6950. Below, the next support lies at 0.6910. A break lower would weaken the outlook, suggesting a deeper correction.

Technical levels