AUD/USD consolidates near 15-month high above 0.7100, eyes Aussie Retail Sales

  • AUD/USD bounces off 0.7118 after stepping back from multi-day high of 0.7148.
  • Market optimism, broad US dollar weakness underpinned the pair’s heaviest rise since early June.
  • RBA minutes cited policymakers’ refrain to use easy money tools, for now, Governor Lowe showed readiness for a rate cut.
  • Australia’s Westpac Leading Index, Preliminary readings of Retail Sales will offer immediate direction, coupled with risk catalysts.

AUD/USD seesaws around 0.7125-30 at the start of Wednesday’s Asian session. The pair recently eased from the highest since April 23, 2019, flashed the previous day. However, 0.7118 triggered contradictory bounce to keep the bulls safe near the multi-day high. While EU fiscal package, vaccine news and hope of further stimulus are some of the key catalysts that have contributed to the aussie pair’s recently rally, broad US dollar weakness becomes the more concrete reason to justify the upside.

Greenback’s drop says it all…

With the risk-on mode in full steam, a contrast to the coronavirus (COVID-19) woes at home, the US currency printed across the board losses on Tuesday. To portray the same, the US US dollar index (DXY) slumped to the lowest since March 10 while taking rounds to 95.17 by the end of Tuesday’s US session. With the active pandemic cases in the US reaching close to 4.0 million mark, talks surrounding phase 4 of the American fiscal package gain momentum. However, bi-partisan negotiations are likely to offer surprise moves.

Elsewhere, the passage of European fiscal package, worth of 750 billion Euros and the RBA’s minutes’ optimism joins the AUD/USD pair traders to remain optimistic. In doing so, the bulls ignore the RBA Governor Philip Lowe’s signals suggesting further rate cuts.

Amid all these catalysts, Wall Street offered mixed moves with Nasdaq closing with 0.81% losses in contrast to mildly positive gains by Dow Jones and S&P 500. Furthermore, the US 10-year Treasury yields also weakened 1.5 basis points to 0.605% by the end of Tuesday’s North American session.

Looking forward, traders will wait for the June month’s preliminary readings of Australia’s Retail Sales, expected 7.1% versus 16.9% prior. Ahead of that, Westpac Leading Index for the Pacific major, prior 0.19%, as well as risk catalysts can offer intermediate moves. Considering the likely softness in the Aussie data, coupled with risk reset, the AUD/USD prices may retrace from the monthly high in adverse conditions. However, odds are currently favoring further upside to 0.7200 threshold.

Technical analysis

Sustained clearance of 0.7100 enables the AUD/USD bulls to challenge highs marked in April 2019 and late-February 2019, around 0.7200. However, overbought RSI suggests a mild pullback that can become worries if it drags the quote below July 2019 peak surrounding 0.7085-80.

Posted in FX