- AUD / USD continued to gain ground for the third session in a row on Thursday.
- A softer risk tone could keep a lid on any further gain before Powell’s speech.
AUD / USD hit more than a week highs, around the 0.7260-65 region at the start of the European session, although quickly retreated a few pips thereafter.
The pair built on this week’s goodish rebound from the mid 0.7100s – support marked by the lower bound of a month-old ascending trend channel – and gained ground for the third consecutive session Thursday. The momentum was exclusively sustained through widespread selling around the US dollar.
The greenback remained depressed amid expectations of accommodative signals from the Fed. Therefore, the main focus will remain on the speech by Fed Chairman Jerome Powell at the Jackson Hole Symposium later this Thursday. Powell’s remarks will be scrutinized for clues to the central bank’s policy framework for pushing up inflation.
The Australian dollar was further supported by national data, which showed that business spending fell less than expected. Indeed, private investments (CAPEX) contracted by 5.9% in the second quarter against the expected drop of 8.4%. However, a softer risk tone capped any further gain for the AUD / USD pair.
The latest escalation between the world’s two largest economies, over actions in the disputed South China Sea, weighed on global risk sentiment. It should be remembered that the United States has imposed visa restrictions on some Chinese people. 24 companies were also added to the entity list for helping to build military islands in the region.
Now it will be interesting to see if the bulls are able to capitalize on the move or opt to lighten their positions ahead of Thursday’s key event risk. In the meantime, the release of the preliminary Q2 US GDP report could sway USD price dynamics and provide some momentum for trading early in the North American session.