- AUD / USD is losing strength as the US dollar tries to gain ground.
- The risky market mood is cushioning the decline in the Aussie.
- A look at US data, the RBA decision and the Sino-Australian updates.
AUD / USD holds low near mid 0.7350s, extending corrective decline in early European trade.
The spot has seen good two-way business so far on Monday, initially extending last week’s bullish momentum to hit new multi-month highs at 0.7382 amid general weakness in the US.
Last week’s conciliatory narrative from US Federal Reserve (Fed) Chairman Jerome Powell continued to weigh heavily on the greenback. Powell’s new monetary policy framework fueled expectations of a prolonged period of low interest rates.
The Fed’s accommodative expectations and coronavirus vaccine hopes boosted Asian stocks, while stronger-than-expected official Chinese manufacturing and services PMIs also added to the optimism, supporting the Aussie to more high efficiency.
Gains in the major, however, were short-lived as sellers returned amid a profit-taking frenzy after price climbed to its highest since December 2018. Additionally, a slight rebound observed in the US dollar against its major peers collaborated with the retracement.
Investors have also weighed in tensions between Australia and its main trading partner, China, after Beijing launched an anti-subsidy investigation into some wine imports from Australia.
Looking forward, markets are awaiting the US macroeconomic releases and the Reserve Bank of Australia (RBA) policy decision for the next price direction.
AUD / USD technical levels
The bears are now looking to test 5-DMA at 0.7315, below which the 0.7300 level could be tested. On the upside, a breach of the 0.7382 hurdle, the confluence of the 20 month high and daily R2 will pave the way towards 0.7400.