AUD/USD struck a three-day low as surging coronavirus cases nL8N2E23QC and potential trade tensions nL1N2E10HB tempered global economic recovery hopes, but bulls could still take some comfort in the aussie's resilience.
Safe-haven flows helped drive AUD/USD below the 10- and 21-day moving averages, and daily RSI implied that short-term momentum remained to the down side.
But AUD/USD price action showed no sign of panic and indicated, instead, that the aussie was still consolidating its gains from the March-June rally -- trading in the 0.6775-0.7070 range as the market digests the rally.
Consolidation should resolve with a break to new trend highs, and AUD/USD longs should also be encouraged by market expectations of Fed rates.
Rallying fed funds futures FFG2 prices indicated that the probability of negative rates was increasing.
The prospect of negative rates and additional Fed policy moves to stimulate the U.S. economy should eventually lead to more substantial U.S. dollar weakness.
If the recent bout of risk aversion were to dissipate, investors would probably shun safe-haven plays for riskier bets.
That could lead AUD/USD to break higher from its consolidation phase and increase the possibility of testing resistance near 0.7285/95 and 0.7390/0.7400.
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