AUD/USD trades with modest gains above mid-0.7100s, lacks follow-through
- AUD/USD gained some traction on Wednesday and snapped two days of losing streak.
- Stability in the equity markets undermined the safe-haven USD and remained supportive.
- Concerns about a row with China over coal imports capped any strong gains for the aussie.
The AUD/USD pair edged higher during the Asian session on Wednesday and recovered a part of the previous day's sharp fall to multi-day lows.
News that Johnson & Johnson paused coronavirus vaccine study due to an unexplained illness in a participant took its toll on the global risk sentiment. The dismal market mood benefitted the safe-haven US dollar and exerted some heavy pressure on the perceived riskier Australian dollar.
The greenback, however, lacked any strong bullish conviction amid fading hopes that Congress would pass the fiscal stimulus bill ahead of the November 3 presidential election. This, in turn, was seen as one of the key factors that assisted the AUD/USD pair to snap two days of the losing streak.
The buck was further undermined by the US political uncertainty and the fact that the incoming polls are tending to suggest a clear-cut presidential victory for the Democrat candidate Joe Biden. However, concerns about a row with China over coal imports capped any strong gains for the aussie.
This makes it prudent to wait for some strong follow-through buying before traders start positioning for the resumption of the recent positive move from 100-day SMA support, around the key 0.7000 psychological mark.
Market participants now look forward to the release of the US PPI figures for September. This along with scheduled speeches by FOMC members will influence the USD price dynamics and produce some meaningful trading opportunities later during the early North American session.
Technical levels to watch