AUD/USD retreats from 2-week tops, turns flat ahead of US data

Analysis General

Published: 2/15/2018 6:54:00 AM

   •  Pickup in the US bond yields helps ease USD bearish pressure.

   •  Upbeat Aussie jobs data/positive commodity prices to limit downside.

   •  US data eyed for some fresh trading impetus.

The AUD/USD pair surrendered a major part of its early strong gains to near 2-week highs and might now be headed towards the lower end of its daily trading range. 

The pair's latest leg of retracement of around 35-40 pips from session tops lacked any obvious catalyst and could be solely attributed to a modest US Dollar rebound over the past hour or so. 

Against the backdrop of growing market expectations that the Fed might raise interest rates four times in 2018, a fresh leg of an upsurge in the US Treasury bond yields helped limit further USD weakness and was eventually seen prompting some fresh selling around higher-yielding currencies - like the Aussie. 

Further downside, however, remained cushioned on the back of today's slightly better-than-expected Australian employment details and by a mildly positive trading sentiment surrounding commodity prices, especially copper, which tends to underpin demand for the commodity-linked Australian Dollar. 

Hence, it would be prudent to wait for a sustained weakness back below the 0.7900 handle before positioning for any further near-term downside. Traders now look forward to the US economic docket, featuring the release of latest PPI print, regional manufacturing indices, usual initial weekly jobless claims and industrial manufacturing data, for some fresh impetus.

Technical levels to watch

A decisive break below the 0.7900 handle now seems to drag the pair back towards 0.7860 horizontal support, below which the fall could further get extended towards 100-day SMA support near the 0.7820-15 region.

On the upside, 0.7965-70 area now seems to have emerged as an immediate resistance, which if cleared might prompt some fresh short-covering move and lift the pair back towards reclaiming the key 0.80 psychological mark.

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