The AUD/USD pair built on its steady recovery from two-week lows and climbed to fresh daily tops, around the 0.7330 region during the first half of the European session.
The US dollar struggled to preserve/capitalize on its modest intraday gains amid fading hopes for an imminent Fed taper announcement at the upcoming FOMC meeting on September 20-21. Apart from this, a generally positive tone around the equity markets benefitted the perceived riskier aussie and assisted the AUD/USD pair to find decent support near the 0.7300 mark.
The uptick, however, lacked strong bullish conviction or any follow-through buying amid worries about the fast-spreading Delta variant and a global economic slowdown. The market concerns were further fueled by Wednesday’s disappointing Chinese macro data, which underscored recent signs of slackening economic momentum in the world’s second-largest economy.
This comes after the Reserve Bank of Australia (RBA) Governor Philip Lowe on Tuesday downplayed speculations for an earlier rate hike and might cap the upside for the AUD/USD pair. Moreover, speculations that the Fed might still begin rolling back its massive pandemic-era stimulus later this year should help limit the USD losses and warrant caution for bulls.
Hence, it will be prudent to wait for some follow-through buying before confirming that the recent pullback from the highest level since mid-July has run its course and positioning for further gains. Traders now look forward to the US economic docket – featuring the Empire State Manufacturing Index, Industrial Production and Capacity Utilization Rate – for some impetus.