- AUD / USD gained ground for the fifth consecutive session on Wednesday amid sustained sales.
- The largely consistent domestic GDP report remained supportive of the strong supply tone around the Aussie.
- The overbought conditions led to profit taking and a slight withdrawal from daily highs.
AUD / USD was down more than 50 pips from five-month highs, although it still managed to trade modest daily gains around the region of 0.6930-40.
The sales bias of the US dollar remained unchanged during the first part of Wednesday’s trading action and helped AUD / USD continue its recent uptrend. Growing optimism about a global economic recovery has helped dispel concerns about US-China tensions and mounting social unrest in the United States, which in turn have kept the greenback under pressure.
Apart from the predominant risk mood, the Australian perceived as riskier was also supported by mainly aligned Australian GDP figures. In fact, Australia’s first quarter GDP contracted 0.3% and the annual rate was 1.4%. AUD / USD climbed to the highest level since early March, although it stopped momentum ahead of the key psychological mark of 0.7000.
The withdrawal did not have an obvious catalyst and could only be attributed to certain profit-taking under extremely overbought conditions on the short-term charts. Given the AUD / USD rally of around 500 pips since last Thursday, traders seemed inclined to take some profit from the table. It is therefore prudent to wait for a follow-up sale before confirming that the pair may have outperformed in the short term.
Going forward, market players are now eagerly awaiting US macroeconomic data for renewed momentum later at the start of the North American session. Wednesday’s US economic report highlights the release of the ADP report on private sector employment, which will be followed by the ISM non-manufacturing PMI in May.
The data could influence the price dynamics in USD, which, along with the broader sense of market risk, will play a key role in generating meaningful trading opportunities. The focus on the market will then shift to the Friday release of the monthly US employment report, known as the NFP.