Upbeat U.S.-Sino trade talk headlines nL1N21F0UA drove AUD/USD above the 10-DMA but the gains were short-lived and support near 0.7060/70 is threatened even after below forecast U.S. data provided a quick boost nL1N21F0XV.
A test of key support near 0.7000 seems likely but traders should not expect a sharp move below there.
Offshore Chinese yuan CNH= erased most of the trade-talk-induced gains while many emerging market currencies are down versus the greenback and have helped pressure AUD/USD below the 21-DMA.
RSIs give bears momentum and could aid in a break of broader 0.7040/70 support, which could usher in a test of key support near 0.7000.
A break below 0.7000 will be difficult though.
Below forecast U.S. economic data nL1N21F0OJ nLNSSEEF0T validates the Fed's patient stance.
Eurodollar and fed funds futures have increased the odds of Fed cuts expected to begin at the end of 2019.
Australian three-month bank bills futures price in RBA cuts but the short-term U.S rates markets suggest Fed cuts will be more aggressive.
Tighter 2-year Australian-U.S.
bond yield spreads could also limit AUD/USD's downside.
Monthly charts see a possible head and shoulders bottom.
A break of 0.7300 likely confirms that bottom and AUD/USD could then rally significantly thereafter.
chart: Click here