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AUD/USD Registered 5-Day Winning Streak - Risk-On Market Sentiment! 

EagleFX

Today in the early European trading session, the AUD/USD currency pair extended its previous 6-day winning streak and rose above mid-0.6900 level while represented 0.33% gains on the day mainly due to the upbeat second-tier data which underpinned the Aussie currency and contributed to the currency pair gains. The reason for the currency pair bullish trend could also be attributed to the market risk-on sentiment backed by the upbeat key data from most of the economies, which added further strength to the perceived risk currency Australian dollar and kept the currency pair higher. On the other hand, the currency pair also benefited from the broad-based U.S. dollar weakness triggered by the risk-on market sentiment. The AUD/USD is currently trading at 0.6963 and consolidating in the range between 0.6929 and 0.6983.

At the data front, Australia’s T.D. Securities Inflation for June flashed upbeat figures on the year as well as every month. Whereas the YoY statistics crossed 0.1% previous to 0.7%, the MoM print reversed the previous -1.2% contraction with +0.6% figures. Moreover, the ANZ Job Advertisements surged a whopping 42% against 0.5% before MoM.

Apart from the upbeat data, the currency pair also took clues from the positive risk barometers like S&P 500 Futures, U.S. 10-year Treasury yields, and stocks in Asia-Pacific. However, the S&P 500 Futures gained over 0.50% to 3,146, while the U.S. bond yields added 1.5 basis points (bps) to 0.686%. Japan’s Nikkei mark was near 1.0% gained to 22,530, but Australia’s ASX 200 dropped 0.40% to 6,033 by the press time.

However, the reason for the market’s upbeat performance could be attributed to the upbeat employment data from the U.S. and China’s services PMI numbers. Let me remind you; the American traders failed to take benefit properly from June month’s employment data before going on the Independence Day holiday. Thus, the positive released data offered evidence that the worse of the coronavirus pandemic was likely over. Additionally, hopes of further stimulus from the global policymakers also supported the risks.

Despite the intensifying coronavirus cases, U.S. President Donald Trump did not take it seriously while saying that 99% of cases of COVID-19 were harmless, which initially gave some confidence to the market players. As per the latest data, the U.S. continued to break the record high numbers with above 50,000 figures since the start of the month. Additionally, numbers from the epicenter Texas and Florida suggested that the situation was worrisome. Whereas, in Texas, the record high coronavirus figures were recorded for the seven consecutive days. Meanwhile, investors seem cautious to place any strong position ahead of any fresh progress over the virus vaccine.

On the other hand, the borders were closed in Australia’s New South Wales, and Victoria in the wake of intensified coronavirus fears also exerted some downside pressure on the risk sentiment capped the currency pair additional gains. Elsewhere, the New Delhi-China tension also added pessimism in the market mood.

U.S. President Trump hasn’t yet imposed sanctions on China policymakers over the Hong Kong security law at the US-China front, which could ease the on-going tension between both parties. In the meantime, the United States recently sent two aircraft carriers to the South China Sea for exercise, which also challenged the current risk-on sentiment.

At the USD front, the broad-based U.S. dollar failed to gain some positive traction and edged lower on the day mainly due to the lack of safe-haven demand in the market backed by the upbeat key data from the U.S. and China. Whereas, the investors were cautiously withdrawing their money from the safe-haven asset due to the optimism over U.S. services sector activity data due to be released later in the day. However, the losses in the U.S. dollar kept the currency pair higher. Whereas, the U.S. dollar index, which tracks the greenback against a basket of six other currencies, was 0.5% lower and heading toward a two-week low at 96.852.

The traders will keep their eyes on the second reading of the U.K.’s Construction PMI for June, expected 47 versus 28.9 prior, which could offer additional strength to the pair. As well as, the June month’s US ISM Non-Manufacturing PMI, expected 49.5 against 45.4 previous would be key to watch. However, the market would be more active today as U.S. traders return to the desk after a long week comprising Friday’s Independence Day holiday.


Daily Support and Resistance

S1 0.6885

S2 0.6912

S3 0.6926

Pivot Point 0.6938

R1 0.6953

R2 0.6964

R3 0.6990

AUD/USD is expected to face the next resistance at 0.6975 mark, and closing of candle beneath this level can begin selling bias in the pair. By the expression of recent candles, the odds of a bullish breakout appears firmer. Thus, the AUDUSD can go behind 0.7045 level upon the breakout of 0.6975 resistance mark. However, the closing of candles below 0.6975 level can trigger selling until 0.6902 level today. The 50 EMA and the RSI both support the bullish bias, but before this, we may see a slight bearish correction in the market until 0.6902 level. Good luck!

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