- AUD/USD gains some traction and finally breaks out of its Asian session consolidation phase.
- The aussie remained supported by upbeat domestic data and status-quo RBA policy decision.
- A subdued USD demand remained supportive of the uptick to the highest level since late Jan.
The AUD/USD pair edged higher during the early European session and climbed to fresh four-month tops, around the 0.6830 region in the last hour.
Following a brief consolidation through the early part of Tuesday's trading action, the pair managed to regain some positive traction and built on the previous day's strong intraday upsurge of over 150 pips. The uptick added credence to the overnight sustained break through the very important 200-day SMA resistance ahead of the 0.6700 mark.
Earlier this Tuesday, the Australian dollar benefitted from a larger than expected jump in the domestic current account surplus, which widened to A$8.4 billion in the first quarter of 2020 as compared to A$1.0 billion in the previous quarter. The AUD/USD pair had a rather muted reaction to the latest RBA policy decision.
At its June policy meeting, the Australian central bank decided to keep the official cash rate at the record low level of 0.25% and reiterated that monetary policy is set to remain accommodative for as long as it is required. The RBA also left its forward guidance on rates and the yields target unchanged, though failed to impress bulls.
On the other hand, the US dollar remained on the defensive amid the recent optimism about the global economic recovery. This coupled with a widespread protect in dozens of American cities over the death of George Floyd at the hands of Minneapolis police further undermined the greenback and extended some support to the AUD/USD pair.
Meanwhile, concerns about a further escalation in tensions between the United States and China seemed to be the only factor capping gains for the China-proxy Australian dollar. It is worth reporting that China on Monday halted orders of US soybeans and other agricultural products, and also cancelled some pork orders.
This coupled with slightly overbought conditions on short-term charts might hold bulls from placing fresh bets and keep a lid on any additional gains, instead might prompt some profit-taking at higher levels. Hence, any subsequent positive move runs the risk of fizzling out rather quickly and remain capped near the 0.6840-50 region.
Technical levels to watch