AUD/USD: Recovery remains capped around 0.7350 on mixed sentiment

• AUD/USD jumped from fresh yearly low but struggles to carry the rebound of late.
• Risk appetite improved even as covid woes prevail, US Senators block starting debate on infrastructure spending.
• US Treasury yields, equities mark another positive day amid economic, earnings optimism.
• Aussie NAB Business Confidence for Q2, ECB will be the key calendar events, risk catalysts are crucial as well.

AUD/USD fades bounce off seven-month low to begin Thursday’s Asian trading with a 15-pip drop to 0.7345, down 0.05% around 0.7355 by the press time. The risk barometer refreshed the yearly low, before snapping a four-day losing streak, the previous day. While there haven’t been any major positives, consolidation and upbeat earnings seem to prepare markets for another fall.

Bears taking a breather, not out of woods

Although market sentiment improved on Wednesday, a lack of fundamentals to back the recovery raise doubts about the AUD/USD pair’s recovery.

Over half of Aussie states are under lockdown and some among them, like New South Wales and Victoria, mark a notable jump in infections, magnifying the Delta covid variant fears. That said, Australia’s daily count of new confirmed cases, per ABC News, jumped to the new high since September 2020, at 141, after declining in the previous three days.

On the other hand, the US Senators voted 51-49 to bloc a debate on President Joe Biden’s Infrastructure Spending Bill. The policymakers were up for a procedural vote on the much-awaited stimulus today.

Alternatively, US equities marked another positive day, also took Treasury yields with them, as bulls are likely convinced that the global policymakers may battle the pandemic. This is somewhat on the line of World Health Organisation (WHO) head Tedros Adhanom Ghebreyesus who said, per Reuters, “The world's leading economies could bring the covid-19 pandemic under control in months.”

Looking forward, National Australia Bank’s (NAB) Business Confidence for the second quarter (Q2), expected 21 versus 17, will decorate the Asia-Pacific calendar ahead of the key European Central Bank (ECB) monetary policy meeting. While the Aussie data may not meet the positive mark and can disappoint the latest hopes, any positive surprises can help AUD/USD to battle the near-term important resistance around 0.7410-15. On the contrary, the ECB’s likely dovish stand may renew the US dollar’s upside momentum and can weigh on the quote afterward. Above all, the covid updates and US policymakers’ discussion on the budget will be the key.

Technical analysis

AUD/USD can’t elope the bears’ table, not even for the short-term until staying below 0.7410-15 horizontal area comprising August–September 2020 tops and early July lows. This in turn keeps directing the quote to an October high of 0.7244.