AUD/USD's recovery from the session's earlier 5-1/2-week lows suggest it may be in for further relief from recent losses as optimism over U.S.-Sino trade talks casts emerging market and high-beta currencies in a favorable light. Encouragingly for AUD/USD, it survived the initial slide with daily cloud top support intact.
Potential trade deal progress nL1N2070QX has buoyed hopes that slowing global trade and growth can be reversed, boosting risk sentiment and leaving the greenback well offered nL1N2070SM.
However, it's not yet time to sound the all-clear for AUD/USD.
Longs will likely need further reassurance from the Fed that U.S. rates will not rise, especially since the RBA recently shifted its rates stance to neutral.
AUD/USD longs will also need China's economic data to stabilize and revert to faster growth.
Upcoming January trade balance and CPI reports will be the next health indication for China's growth.
Should today's upbeat risk sentiment persist AUD/USD is likely to break 0.7110/20 resistance and test the converging 10-, 21- and 55-DMAs.
If it clears those, AUD/USD will target 0.7245/65 resistance.
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