AUD/USD battles the key hurdle to north below 0.7500 amid risk-on mood

• AUD/USD grinds higher around three-month top after the heaviest daily jump in seven weeks.
• Upbeat market sentiment underpinned stocks, US Treasury yields refresh five-month high.
• RBA Meeting Minutes offered no surprise, IMF comments on China failed to stop the bulls.
• Aussie Westpac Leading Index, PBOC Interest Rate Decision eyed for fresh impulse.

AUD/USD bulls take a breather around 0.7475-80 during early Wednesday morning in Asia, following its heaviest daily jump since late August. The risk barometer pair cheered US dollar weakness amid a brighter mood to refresh the multiday high the previous day. However, strong resistance around 0.7480 challenges the quote’s further upside of late.

Global market sentiment improved on Tuesday after the downbeat US housing number questioned the Fed’s tapering plans. Also positive for the AUD/USD was a lack of any surprises from the Reserve Bank of Australia’s (RBA) Monetary Policy Meeting Minutes, as well as easing coronavirus fears at home.

Additionally, chatters that the US Democrats are close to the much-awaited economic stimulus offered extra strength to the risk appetite and the AUD/USD prices. “President Joe Biden and Democratic lawmakers are close to a deal on the cost and scope of their cornerstone economic revival package and hope to reach a compromise this week, people briefed on the negotiations said on Tuesday,” per Reuters.

US Housing Starts registered a sharp fall in September, -1.6% MoM versus +1.2% prior, whereas the Building Permits registered the largest contraction since February, down 7.7% compared to 5.6% previous readouts. Further, the RBA Meeting Minutes was a copy of September wherein the policymakers reiterated cautious optimism while cutting down the reflation fears.

Elsewhere, the International Monetary Fund (IMF) expects the Chinese economy to grow by 8% in 2021 but added that the economic recovery remains unbalanced, per Reuters. The news also said, “China's economic setbacks have darkened the outlook for countries in its orbit, from South Korea to Thailand, as a sharp factory slowdown and trade bottlenecks in the world's second-largest economy hit Asia on the supply as well as demand sides.”

Amid these plays, the Wall Street benchmarks flirt with the record tops whereas the US 10-year Treasury yields gained 5.7 basis points (bps) to rise to the highest levels since late May. Further, the US Dollar Index (DXY) dropped to a three-week low before consolidation losses around 93.77 at the latest.

Looking forward, Australia’s Westpac Leading Index for September, prior -0.27%, will precede the People’s Bank of China (PBOC) Interest Rate Decision and China Housing Price Index for September, previous readouts 4.2%, will be important data/events for AUD/USD traders. Although the PBOC isn’t expected to alter monetary policy, strong defense from financial market risks emanating from reality companies’ defaults can’t be ruled out, which in turn could help Aussie bulls.

Technical analysis

AUD/USD needs a daily closing beyond the four-month-old horizontal hurdle surrounding 0.7480 to justify a 100-DMA breakout. Bullish MACD and a clear cross of the key moving average keep buyers hopeful to aim for 0.7530-35 resistance line, established in early April. However, RSI conditions seem nearly overbought and hence bulls may take a breather but the stated 100-DMA and an ascending support line from September 30, respectively around 0.7405-7400, restrict the bear’s entry.

AUD/USD: Daily chart

Trend: Further upside expected