AUD/USD looks to extend the break above 0.6900 as risk-tone improves

• US dollar retreats as risk sentiment improves.
• UK-Australia trade deal optimism underpins the aussie.
• All eyes on US data, Powell’s testimony for fresh cues.

The AUD/USD pair looks to extend its bounce above the 0.6900 level heading into the European session, as the bulls ride a fresh risk-on wave that has downed the US dollar across the board.

The renewed US dollar selling across its main competitors amid a rebound in the US stock futures, suggests a recovery in the risk sentiment. Markets cheer the latest optimism over a likely UK-Australia trade deal, as both sides launch trade talks, starting mid-July.

Further, reports that Australia is considering resuming travel bubble with New Zealand in two weeks also adds to the improved market mood and in turn boosts the higher-yielding aussie dollar.

However, it remains to be seen if the spot can extend the upside, as intensifying fears over the second-wave of coronavirus in the US, China and Australia weigh on the local currency. Meanwhile, souring Australia-China diplomatic relations could also keep the bulls unnerved.

Earlier today, Australian Senator Concetta Fierravanti-Wells called om the government to slap tariffs on Chinese imports while speaking in parliament.

Looking ahead, the spot will continue to track the dollar moves and the sentiment on the global stock markets ahead of the US macro news and Fed Chair J. Powell’s testimony – day 2.

AUD/USD technical levels to watch

The upside targets are seen at 0.6950 (psychological levels) and 0.6977 (Tuesday’s high). To the downside, the daily low at 0.6852 could limit the losses. A break below which the 0.6800 level could be tested.

AUD/USD additional levels