AUD/USD awaits clear direction to extend recovery gains beyond 0.6700
- AUD/USD remains modestly changed after a two-day winning streak.
- The US dollar witnessed pullback, risk-tone recovers.
- Comments from RBA’s heath largely ignored.
- Eyes on Australia’s Westpac Consumer Confidence, coronavirus (COVID-19) news from China.
AUD/USD stays within the four-hour-old range, between 0.6707 and 0.6716, while taking rounds to 0.6715 at the start of Wednesday’s Asian session. That said, the pair bounced off the decade low during the last two days as risk-tone improves. Even so, coronavirus risk remains on the cards while the US fundamentals are yet on the top of the major economies.
It should also be noted that the Aussie pair showed no major reaction to the RBA’s Alexandra Heath. The head of economic analysis crossed wires before few minutes while saying the outlook for consumption remains a major uncertainty.
Risk reset or recovery?
Market’s trade sentiment has recently improved amid updates suggesting that the coronavirus, officially called COVID-19 by the World Health Organization (WHO), the outbreak seems contained within China. The WHO mentioned that the first vaccine could be ready in 18 months. Also supporting the sentiment could be the Chinese government’s efforts to placate government.
Elsewhere, heads of the Fed, ECB and BOE all separately appeared for testimonies and refrained from being too dovish, despite citing coronavirus risk, which in turn seems to be risk-supportive.
While portraying this, the US 10-year treasury yields revisit 1.60% mark whereas Wall Street also registers another day of gains.
It’s worth mentioning that while the risk-tone has recently recovered, broad fears of coronavirus’ downside impact on the global economy remains on the card.
US dollar is destined to be the king…
Despite witnessing a pullback in recent days, amid a set of mixed second-tier data, headline economics concerning the US economy are strong enough. The same have recently helped the US Federal Reserve Chairman Jerome Powell and FOMC member Neel Kashkari to sound optimistic.
Looking forward, February month Westpac Consumer Confidence, expected +1.4% versus -1.8% prior, could offer the immediate direction whereas updates from China will also be worth watching. During the US session, the second day of the US Fed Chair’s testimony should entertain the markets.
Technical Analysis
While 10-day EMA around 0.6725 acts as the closest resistance, a downward sloping trend line from January 01, at 0.6750, becomes the key upside barrier. Alternatively, sellers will be on the lookout for entry below 0.6660.