The pair is trading near session highs close to 0.7035
And the pair is testing the 100-day MA (red line) @ 0.7022 in trading again to start the new week. The move higher in the aussie comes after some better-than-expected Chinese data for June, despite Q2 GDP slowing to its weakest annual pace in 27 years.
The beat in industrial production is arguably the more noticeable one as it suggests that factory activity may still be holding up in light of global trade tensions. It could also mean that recent policy measures by the government are working to some extent but the overall GDP data is less suggestive of that.
Anyway, back to AUD/USD, the pair is now running into some key resistance levels with the 100-day MA being the first and the trendline resistance from June last year @ 0.7045 being the second area to watch out for today.
Buyers will be looking to try and hold a daily break above these levels to try and establish some further upside momentum seen over the past few sessions. Following those levels, the next key resistance level will be the 200-day MA (blue line) @ 0.7092.
Should these key daily resistance levels give way, I reckon it could precipitate a solid move higher in the pair on the back of further short covering before we get to the FOMC meeting later this month. I reckon a move back towards 0.7200 seems likely in that case but I'd be wary of any potential for gains to stretch further from there.
As for risk events this week, watch out for Thursday where we'll get the latest Australian labour market report. That'll help to give more clues about what the RBA has in store for market participants when they meet on 6 August. Currently, Australian cash rate futures have priced in only a ~16% probability of a 25 bps rate cut for that meeting.
