AUD/USD consolidates recent gains around 0.7200 amid mixed sentiment

• AUD/USD rose more than it lost after taking a U-turn from 0.7134.
• US-China trade deal talks likely happening “soon” despite political differences, America toughens stand on Iran.
• US Jobless Claims, Philadelphia Fed Manufacturing Survey flashed downbeat figures.
• Aussie Commonwealth Bank PMI, Flash Retail Sales and US Markit PMIs will be the key data to watch.

AUD/USD eases from the recent high of 0.7203 to currently around 0.7191 at the start of Friday’s Asian session. The pair aussie pair dropped to refresh a one-week low of 0.7134 during the initial Thursday just to recover the losses and add extra gains afterward. While short-covering moves of the US dollar could be the best to trace the previous fall, downbeat data from America joins trade-positive comments from China, concerning the phase-one deal, to help restore the market sentiment. However, the coronavirus (COVID-19) woes join the US-Iran tussle, which also comprises likely tension with Russia and China, challenge the optimism.

Cautious optimism at its best…

Although the recent surge in the Victorian pandemic cases, from the monthly bottom of 216 to 240, challenges the market sentiment, improving odds of the Sino-American trade deal plays positive for the risk barometer. The reason could be traced Chinese comments suggesting they’d have a call “soon”. The US Commerce Minister, on the other hand, said, “they’ll be in touch”.

Elsewhere, Trump administration remains tough and adds worries for Iran after showing the intention to restore almost all United Nations (UN) sanctions. In the latest development, US Secretary of State Mike Pompeo told to strongly push arms embargo and do everything to enforce them.

Additionally, the virus from Europe remains a grave concern whereas the American Congress members inch closer to discuss the much-awaited aid package.

Amid all these catalysts, Wall Street closed in mixed with Nasdaq gaining over 1.0% backed by tech rally. Even so, the US 10-year Treasury yields dropped 2.2 basis points (bps) to 0.653% by the end of Thursday’s North American session. It should also be noted that the US dollar index (DXY) took a U-turn from a one-week top of 93.24 to defy Wednesday’s run-up during the previous day.

Moving on, traders will eyes the Commonwealth Bank PMIs as immediate catalysts ahead of the flash Retail Sales data for July. Following that, the US activity numbers and Existing Home Sales will be the key to watch. Although market consensus favors upbeat outcome for most scheduled figures, any negative surprises will be enough to challenge the latest recovery.

Technical analysis

An ascending trend line from August 03, currently near 0.7135, restricts the pair’s immediate downside ahead of the monthly bottom surrounding 0.7075. On the upside, sustained trading beyond 0.7200 will attack 0.7245 and the year 2019 top surrounding 0.7300. Overall, the view remains bullish unless the quote slips below 0.7065/60 area including June monthly high and July 24 low.