Much to the dismay of the RBA, several factors are likely to keep AUD/USD underpinned.
Indeed, the downside misses to May NFP and AHE nLNS7HEF4X follow a string of recent U.S. data that suggest slower economic growth.
As a result, U.S. Treasury yields remain pinned near recent lows and Australian-U.S.
yield spreads have tightened.
Eurodollar EDU9 and fed funds FFU9 prices rallied sharply and suggest the market sees an increased chance of Fed rate cuts.
In fact, rates markets FEDWATCH now price in a near 100% chance of a Fed cut in July.
While the U.S. rate complex is heavy, China's President Xi eased some concerns on U.S.-Sino trade nR4N23D00C after saying President Trump is his friend.
China's yuan, which neared 6.9625 in the overnight session, traded below 6.9350 as the market took a more positive take on trade deal prospects.
Given these factors, especially the higher probability of Fed cuts, AUD/USD dips are likely to get bought.
Covering of net-short aussie and net-long U.S. dollar positions 0#NETUSDFX= could add to gains, and a break, and sustained hold, above the 55-DMA will encourage bulls.
Tests of 0.7065/75 resistance, the 200-DMA and 0.7185/0.7205 zone are then likely.
chart: Click here