AUD/USD rebounds swiftly from daily lows, back near mid-0.7100s
- AUD/USD lost some ground amid concerns over worsening US-China relations.
- The risk-off mood benefitted the safe-haven USD and exerted some pressure.
- The impasse over additional US stimulus capped any strong gains for the USD.
The AUD/USD pair quickly bounced around 30 pips from daily swing lows and was last seen trading with modest gains, just below mid-0.7100s.
The pair built on the previous day's strong positive move of over 135 pips and gained some follow-through traction through the first half of the trading action on Wednesday. The pair shot to the highest level since April 2019, albeit lost momentum near the 0.7165-70 region amid fresh concerns over worsening US-China relations.
Diplomatic tensions between the world's two largest economies escalated further after the United States asked China to close its consulate in Houston. China was quick to respond and threatened to retaliate with firm countermeasures. This, in turn, took its toll on the global risk sentiment and weighed on the China-proxy aussie.
Meanwhile, the risk-off mood forced investors to take refuge in the safe-haven US dollar, which further contributed to the AUD/USD pair knee-jerk slide of around 50 pips during the early European session. However, the impasse over the next round of US economic stimulus measures kept a lid on any strong gains for the greenback.
It is worth reporting that policymakers have been struggling to reach consensus on a $3 trillion relief bill. The said bill was passed by the Democrat-majority House of Representatives two months ago but has been ignored by the Republican-majority Senate. Hence, the key focus will remain on developments surrounding the US stimulus package.
This along with fresh US-China headlines will influence the broader market risk sentiment and produce some meaningful trading opportunities amid relatively thin US economic docket, featuring the release of Existing Home Sales data.
Technical levels to watch