- Fresh tensions between the US and China weighed on the China-proxy Aussie.
- Sliding US bond yields undermined the USD and helped limit the downside.
- Investors now look forward to the US retail sales data for a fresh impetus.
The AUD/USD pair held on to its weaker tone through the early European session on Wednesday, albeit found some support near the 0.6725 region and recovered few pips from daily lows.
The pair extended its recent pullback from levels just above the 0.6800 round-figure mark, touched last week, and remained under some heavy selling pressure for the third consecutive session on Wednesday amid fresh trade uncertainty.
Trade uncertainties continues to exert pressure
Fresh signs of strains on relations between the world's two largest economies reemerged after China criticized the new US legislation as supportive of pro-democracy protests in Hong Kong and dented investors’ appetite for riskier assets.
The latest development further dampened prospects for an immediate resolution of the prolonged US-China and turned out to be one of the key factors exerting some fresh downward pressure on the China-proxy Australian Dollar.
Meanwhile, the ongoing fall in the US Treasury bond yields kept the US Dollar bulls on the defensive and helped limit any deeper losses, rather assisted the pair to recover around 20 pips from daily lows, back closer to mid-0.6700s.
It, however, remains to be seen if the pair is able to capitalize on the recovery move or remains depressed as market participants now look forward to Wednesday's important release of the US monthly retail sales data for a fresh impetus.
Technical levels to watch
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