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AUD/USD is on a moderate bounce from near two-week lows touched earlier this Wednesday.
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Strong domestic data, upbeat Chinese PMI, a positive risk tone offer some support to the aussie.
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The overnight hawkish remarks by Fed officials could revive the USD demand and cap the upside.
The AUD/USD pair reverses an intraday dip to the 0.6885 region, or a nearly two-week low touched on Wednesday and holds steady near the daily high during the early European session. The pair, for now, seems to have stalled this week’s retracement slide from the vicinity of mid-0.7000s, or its highest level since June 17 touched on Monday.
The Australian dollar received support from strong domestic data and reports of upbeat Chinese services-sector activity. Indeed, Australian retail sales volume recorded its third consecutive quarter of growth and rose 1.4% in the April-June period to a new record. Separately, China’s Caixin Services PMI improved further and hit a 15-month high of 55.5 in July.
This, along with the decline in the price of the US dollar, helped the AUD/USD pair to attract some buying at lower levels. Signs of stability in equity markets serve as a key factor for the safe-haven greenback and provide additional support to risk-sensitive Australia. That said, any meaningful recovery seems elusive, a warning for bulls.
Several Federal Reserve officials sounded hawkish on Tuesday and hinted that more interest rates are coming in the near term. Furthermore, growing recession fears and mounting diplomatic tensions over US House Speaker Nancy Pelosi’s Taiwan visit should keep a lid on any optimistic move in the markets. This, in turn, could revive the USD demand and cap gains for the AUD/USD pair.
This makes it prudent to wait for strong follow-through buying before positioning for any further appreciating move. Market participants now look forward to the US ISM Services PMI, due for release later during the early North American session. This, along with the US bond yields and the broader risk sentiment, would influence the USD and provide some impetus to the AUD/USD pair.
Technical levels to watch
AUD/USD
