AUD / USD regains ground lost initially and approaches the 0.7750 region again

  • The suspension of the economic dialogue between China and Australia causes some selling around the AUD / USD.
  • A modest USD weakness helps the pair attract some buying near the round 0.7700 level.
  • Risk appetite sentiment also benefits the higher perceived risk AUD and supports the pair’s recovery.

The pair AUD/USD has managed to recoup its intraday losses and has moved to the upper end of its daily range, near the region of 0.7750, at the start of the European session on Thursday.

The pair has seen strong selling during the early part of trading action on Thursday after it China to suspend indefinitely all activities in the framework of the China-Australia Strategic Economic Dialogue. As China is Australia’s main trading partner, the announcement points to strained relations between the two countries and puts some downward pressure on the Australian dollar.

Despite the negative catalyst, AUD / USD has captured some buying near the round 0.7700 level. The bulls may now be looking to take advantage of this week’s bounce from the 0.7675 region, the lowest level since April 14 touched on Tuesday. The intraday rally is due to a modest US dollar weakness and a positive tone in equity markets.

The USD has extended the modest retracement of the previous day from two-week highs, triggered by unimpressive US economic data. The ADP report showed that private sector employers added 742,000 jobs in April and the US ISM services PMI fell to 62.7 in April, both below market expectations. This, along with weaker US Treasury yields, has weighed on the dollar.

Apart of this, underlying bullish sentiment in financial markets has acted as a tailwind for the Australian dollar of higher perceived risk and has continued to support the rebound. However, the rise is likely to remain limited, at least for the time being, as investors might prefer to wait on the sidelines before the monthly US NFP jobs report to be released on Friday.

In the meantime, traders could follow the signs of Thursday’s release of the usual data for US initial weekly jobless claims, to be released at the start of the American session. Apart from this, US bond yields and general market risk sentiment will influence USD price dynamics and could generate some trading opportunities around the AUD / USD pair.

AUD / USD technical levels

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