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AUD/USD: Bounces off one-week low on Powell-Mnuchin comments, eyes RBA

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FXStreet in Market News 12 92089
December 1, 2020 07:12

content provided with permission by FXStreet

  • AUD/USD probes pullback from multi-month high ahead of the key data/events.
  • Fed Chair Powell conveys economic worries, US Treasury Secretary Mnuchin pushes for stimulus.
  • Risks dwindle amid economic fears, uncertainty over the US covid aid package.
  • Aussie PMIs ease, China Caixin Manufacturing PMI, RBA will be the key.

AUD/USD picks up bids from 0.7338, currently around 0.7350, during the early Asian trading on Tuesday. The pair recently benefited from the downbeat rhetoric by the US Fed Chair Jerome Powell and Treasury Secretary Steve Mnuchin. In doing so, the quote trims the previous day’s losses that pulled the prices back from the highest since August 2018.

Vaccine-led optimism isn’t enough…

While Moderna’s communication of 94% effective rate adds to the market’s coronavirus (COVID-19) vaccine hopes, traders remain worried as Fed’s Powell conveyed concerns for the economic recovery. On the same line, Treasury Secretary Mnuchin pushed for $455 billion to be used for the much-awaited US COVID-19 stimulus to avoid further economic hardships.

Earlier on Monday, risks dropped as fears of economic recovery likely to remain downbeat in Q4 2020 gained momentum. Also weighing on the mood were headlines suggesting China’s tussle with Australia, the US and the UK.

Against this backdrop, Wall Street benchmarks dropped and the US dollar index (DXY) bounced off the lowest since April 2018 to mark notable gains by the end of Monday.

Talking about recently published economics, Australia’s November month AiG Performance of Mfg Index and Commonwealth Bank Manufacturing PMI eased from 56.3 and 56.1 respective priors to 52.1 and 55.8.

Looking forward, traders await China’s Caixin Manufacturing PMI for November, expected 53.5 versus 53.6 prior, for fresh impulse ahead of the key RBA. Although the policymakers aren’t expected to offer any change to the RBA’s monetary policies, downbeat comments over the economic and inflation outlook may probe the AUD/USD bulls.

Read: Reserve Bank of Australia Preview: How long could policymakers remain confident?

Technical analysis

AUD/USD buyers’ ability to return from 0.7345/40 support-zone, comprising highs marked between mid-September and November 17, keeps the pair directed towards the 0.7400 round-figure. Also acting as immediate support is an upward sloping trend line from November 13, at 0.7310 now.