AUD/USD advances towards 0.7300 on firmer market sentiment

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  • AUD/USD bulls take a breather around weekly top after three-day uptrend.
  • US equities rise for fifth consecutive day, DXY prints four-day losing streak despite firmer Treasury yields.
  • Hopes of overcoming the virus, stimulus news and fewer challenges for the easy money policies underpin buying of high-yielding assets.
  • Australia Q2 Private Capital Expenditure, US Core PCE, Preliminary Q2 GDP decorate calendar but Jackson Hole Symposium is the key.

AUD/USD seesaws near the weekly high surrounding 0.7280–75, after a three-day run-up, during early Thursday morning in Asia. The Aussie pair benefits from the upbeat sentiment, ignoring softer data and record daily infections at home, to portray the recent gains despite lacklustre markets.

Increasing hopes that the global central banks’ easy money policies will prevail for a longer time joined optimism towards overcoming the coronavirus to propel the riskier assets like equities and AUD/USD. In doing so, traders reject the US Dollar Index (DXY), down 0.07% around the one-week low of 92.80, even as the US 10-year Treasury yields rose the most in three weeks to 1.35%, up by six basis points (bps) on a day.

Downbeat US Durable Goods Orders for July and US Health Official Anthony Fauci’s expectations of getting the COVID-19 conditions under control by early 2022, backed by strong jabbing, favoured the firmer risk appetite. Also on the positive side was news that representatives of Wall Street and China will meet to soften the terms of equity trading. Furthermore, chatters over faster jabbing in the Asia–Pacific and news of more covid vaccine approvals in the pipeline to the US Food and Drug Administration (FDA) brighten the market’s mood as well. It’s worth mentioning that the US policymakers’ passage of the $3.5 trillion budget plan on Tuesday also had its contribution to the AUD/USD upside.

On the contrary, Australia’s downbeat Q2 Construction Work Done and all-time high daily cases joined the speedy spread of the virus elsewhere to challenge the AUD/USD bulls. Additionally, cautious sentiment ahead of the Jackson Hole Symposium probes the pair buyers.

Amid these plays, US equities remained firm for the fifth consecutive day by the end of Wednesday.

Looking forward, Australia Private Capital Expenditure for the second quarter (Q2), expected 2.5% versus 6.3% previous readouts, can offer immediate direction. However, the US Personal Consumption Expenditure (PCE) Inflation data and second reading of the US Q2 GDP will be more important as markets brace for Fed Chair Jerome Powell’s speech, up for publishing on Friday.

“From a US growth perspective, the publication of July PCE data this week is important as it will help to clarify if consumers are actually shifting spending away from goods to services. The consensus estimates that July PCE spending rose 0.4% which would be more consistent with the ongoing improvement in the labour market and rotation to services consumption,” said Australia and New Zealand Banking Group (ANZ).

Technical analysis

AUD/USD bulls remain hopeful towards reaching July’s low of 0.7288 and the 0.7300 round-figure on a clear break above 10-DMA for the first time in 13 days, not to forget sustained trading past October 2020 tops.

 

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