AUD/USD clings to modest gains near 0.6900 mark, lacks follow-through
- AUD/USD regains some positive traction on Wednesday amid the upbeat market mood.
- The risk-on mood further undermined the safe-haven greenback and remained supportive.
- Fears of a second wave of COVID-19 cases, geopolitical tensions might cap any strong gains.
The AUD/USD pair edged higher during the early European session and refreshed daily tops, around the 0.6920-25 region in the last hour, albeit lacked any strong follow-through.
The pair reversed an early dip to mid-0.6800s and has now moved into the positive territory. A combination of factors remained supportive of the uptick and assisted the AUD/USD pair to reverse the previous day's modest losses.
The Fed's announced changes to its bond-buying program and report that the Trump administration was contemplating a $1 trillion infrastructure spending bill remained supportive of the ongoing rally in the global equity markets.
This coupled with a positive breakthrough in the fight against the coronavirus added to the latest optimism. Trial results showed that death rates were reduced by about a third in COVID-19 patients who took a widely used steroid called dexamethasone.
The upbeat market mood undermined demand for the safe-haven US dollar and benefitted perceived riskier currencies, like the aussie. However, fears over a second wave of coronavirus cases and geopolitical tensions might cap gains for the AUD/USD pair.
It is worth reporting that both India and China suffered casualties in clashes at a disputed border area on Tuesday. Meanwhile, tensions in the Korean peninsula intensified after North Korea blew up a joint liaison office and threatened to send troops to the DMZ.
Hence, it will be prudent to wait for some strong follow-through buying, possibly beyond the overnight swing highs around the 0.6975 region, before positioning for the resumption of the AUD/USD pair's prior/well-established bullish trend.
Moving ahead, market participants now look forward to the release of the US housing market data – Building Permits and Housing Starts. This followed by the Fed Chair Jerome Powell's second day of testimony might provide some trading impetus.
Technical levels to watch