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AUD/USD On the Verge of Bearish Correction - Who's Up for Selling? 

EagleFX

The AUD/USD extended its Asian session gains and hit the intra-day high above the mid-0.7100 zone. Nevertheless, the basis for the bullish sentiment in the AUD/USD pair could be attributed to the moderate upbeat trading bias backed by the vaccine's success. The pair is now consolidating in the range between 0.7134 - 0.7161.

The positive tone around the global equity markets weakened the demand for the safe-haven U.S. dollar and extended some support to the Australian dollar's perceived riskier. However, the risk-on market sentiment was supported by the latest optimism over a potential vaccine for the highly contagious COVID-19 disease.

On the negative side, the second wave of coronavirus outbreak in the U.S. dampened prospects for a quick turnaround for the domestic economy. As per the latest report, the virus continues to take its toll on global economies, with approximately 240,000 cases reported in the last 24 hours, over 60,000 just in the U.S. Considering the current situation of the virus in the U.S., the U.S. President Trump said that things would get worse before getting better. Considering the U.S.'s current situation, Trump decided to pay almost $ 2B to secure hundreds of millions of doses of the Pfizer/BioNTech coronavirus vaccine that Americans would receive for free.

At Home, the state of Victoria has recorded 403 new cases overnight and five new deaths. As in result, the traders will be cautious of taking the cross higher against a backdrop of the COVID19 outbreak in Victoria, as it risks spreading to NSW.

Apart from virus worries, the tensions between the world's two largest economies escalated after the U.S. ordered Chinese Consulate to leave Houston. Whereas, the Dragon Nation decided to close the U.S. consulate in the southwestern city of Chengdu to take revenge for the forced closure of the Chinese diplomatic facility in Houston. There was no negative news related to the trade deal between the two economies, at least for now, but this tense situation could harm the deal.

Elsewhere, the uncertainty over the next round of the U.S. fiscal stimulus measures continuously challenged the risk-on market sentiment. However, the uncertainty on the U.S. fiscal stimulus package suddenly increased after the Republican-majority Senate largely ignored a $3 trillion relief bill, which was already passed by the Democrat-majority House of Representatives two months ago.

The U.S. Treasury Secretary Steve Mnuchin initially signaled that the U.S. policymakers would be ready to deliver aid packages by the end of July. However, it dimmed after the government cited the need for an intermediate extension of the unemployment insurance benefits.

Besides this, the Australian Finance Minister Mathias Cormann's comment that the backdrop of an economic and fiscal outlook remains highly uncertain initially challenged the currency pair's upside momentum.

Looking forward, the traders will keep their eyes on the weekly U.S. jobless claims, which are scheduled to release on the day. This data might influence the USD price dynamics. As well as the updates concerning the U.S. fiscal package discussions and vaccine news can offer intermediate moves to the pair.


Daily Support and Resistance

S1 0.7003

S2 0.7074

S3 0.7106

Pivot Point 0.7145

R1 0.7177

R2 0.7216

R3 0.7287

The AUD/USD pair in an overbought region at the 0.7150 mark, and a bullish crossover at this level, can prolong the buying trend unto the 0.719 level. Formation of a candle underneath 0.7150 could drive selling unto the 0.7110, which indicates a 23.8% Fibo mark, while additional selling beneath 0.7110 could point the pair towards 38.2% Fibo mark, at 0.7085. Let's focus on 0.7095 trading level, to stay bullish over and bearish beneath 0.7160. Good luck!

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