- AUD/USD resumes offers to refresh the intraday high and extend the previous day’s bounce off the weekly high.
- Australia’s trade balance improved in June even as both exports and imports fell.
- Mixed sentiment and a weaker US dollar bolster recovery moves.
- Second tier US data, risk catalysts will be important for further momentum.
AUD/USD remains in the limelight for the second day in a row, refreshing the intraday high near 0.6965. In doing so, the Aussie pair warrants firmer trade balance data from the Australian Bureau of Statistics while encouraging a weaker US dollar amid a slow Asian session on Thursday.
That said, Australia’s trade balance rose to 17,670 million in June, well above the forecast 14,000 million and the previous 15,965 million. However, both imports and exports declined to 0.7% and 5.1% in the reported month from prior values of 5.8% and 9.5% respectively.
It should be noted that news from Bloomberg suggesting a lack of support for US-Taiwanese relations also appears to be helping AUD/USD prices. The reason could have to do with the ability of the Democratic Party members to prevent US policymakers from further meddling in Taiwan, which China does not like, the same could help market sentiment and the Australian pair. “The Biden administration is pressuring Democratic senators to rein in a bill that would change U.S. policy toward Taiwan, including designating it a major non-NATO ally, according to people familiar with the matter,” the news said.
Elsewhere, mixed data from the US and Fedspeak also appear to have weighed on the US dollar. That said, the US Dollar Index (DXY) remains undecided around 106.35 after refreshing the weekly high at 106.82 earlier on Wednesday.
On Wednesday, the US ISM Services PMI for July rose to 56.7 from 55.3 previously and the market expectation of 53.5, while the final reading of the S&P Global Services US PMI for July fell. to 47.3, marking the first contraction in two years, from 52.7 in June and the flash estimate of 47. Elsewhere, China’s Caixin services PMI for July also surprised markets with upbeat data .
Speaking on Fedspeak, St. Louis Federal Reserve Chairman James Bullard said, “(There’s) still some way to go to achieve tight monetary policy. The policymaker adds that he still wants to reach 3.75-4% this In addition to the Fed’s Bullard, Minneapolis Fed Chairman Neel Kashkari and Richmond Fed Chairman Thomas Barkin have also joined the league of hawks in the Fed to exert downward pressure. However, San Francisco Fed President Mary Daly seemed to send mixed signals and tame the DXY bulls thereafter.
Against this backdrop, market sentiment remains gloomy after portraying yesterday’s optimism. While signaling the mood, S&P 500 futures remain directionless near 4,150, and 10-year US Treasury yields remain under pressure at around 2.71%, down three basis points (bp) at the time of publication.
Looking ahead, German Factory Orders for June will lead the US Goods and Services Trade Balance for June, expected at -$80.1 billion vs. -$85.5 billion previously, as well as Weekly Initial Demands. unemployment, expected at 259,000 against 256,000 previously, to decorate the calendar. However, particular attention will be paid to comments from ECB and Fed policymakers, as well as Sino-US tension over Taiwan for clear guidance ahead of Friday’s US NFP.
A clear upside break of the support-turned-resistance line from July 14, around 0.7000 at press time, becomes necessary for AUD/USD buyer conviction. Failure to reach this level may remind sellers targeting 21-DMA support around 0.6890.