AUD/USD clings to modest gains, bulls await a sustained move

8 September, 2020

AUD/USD regained positive traction on Tuesday and build on last week’s bounce from 0.7220 region. A strong pickup in the USD demand, rising US-China tensions might keep a lid on any strong gains.

The AUD/USD pair spiked to three-day tops in the last hour, albeit struggled to find acceptance above the 0.7300 mark and quickly retreated few pips thereafter.

The pair regained some positive traction on Tuesday and finally broke out of its overnight/Asian session consolidation trading range. Bulls took cues from upbeat Chinese trade balance figures and were now looking to build on last week's rebound from the 0.7220 region, or over one-week lows.

However, a strong pickup in the US dollar demand might keep a lid on any strong gains for the AUD/USD pair. After being hit slightly by Friday's mixed US monthly jobs report (NFP), the greenback was back in demand and was being supported by some heavy selling around the European currencies.

This coupled with fresh concerns over rising US-China tensions might further drove some haven flows towards the USD and cap the upside for the China-proxy Australian dollar. This makes it prudent to wait for some strong follow-through buying before positioning for any near-term positive move.

The New York Times reported that the US is considering banning some or all products made with cotton from China’s Xinjiang province. Meanwhile, the US President Donald Trump on Monday ramped up his anti-Chinese rhetoric by raising the idea of de-coupling the US and Chinese economies.

In the absence of any major market-moving economic releases from the US, the USD price dynamics will influence the AUD/USD pair. Apart from this, the broader market risk sentiment might further contribute towards producing some trading opportunities around the perceived riskier aussie.

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