Rally Extends For Third Day; Iron Ore Supports

Another positive session for risk assets saw AUD/USD finish higher again, the pair posting gains of 0.25%. The rate hit highs of 0.7280 before pulling back slightly, last down 3 pips at 0.7273.

• From a technical perspective AUD/USD traded higher again Wednesday and maintains this week's firm tone. Gains however are considered corrective. The breach of 0.7290 last week confirmed an extension of the bearish price sequence of lower lows and lower highs, reinforcing the current downward cycle. Price has also cleared 0.7200 and this opens 0.7053 further out, a Fibonacci retracement. Initial firm resistance is seen at 0.7290, low Jul 21.
• Also supporting AUD is a rebound in iron ore, prices have recovered to the highest levels since August 18 after bottoming out around a week ago, there is still some way to go for prices to regain their July peaks above $200, currently at $152.15 in Singapore. CBA says: "Expectations around China's steel output cuts in H2 2021 will likely drive iron ore prices in the short‑term. China's decarbonisation drive is a real and present danger to both iron ore prices and to a lesser extent AUD."
• On the coronavirus front Victoria reported 80 new cases in the past 24 hours, ticking up after dropping for the past few days. The latest reports focus on a struggling healthcare system, with two hospitals moving to emergency measures yesterday. Some areas of NSW could be released from the harshest lockdown measures by the end of this week, NSW Premier Berejiklian has mentioned "additional freedoms" for the double vaccinated in previous comments, though there has been chatter of targeted lockdowns.
• The latest Q2 GDP partial print, CapEx, headlines the local docket today, coming on the heels of yesterday's soft completed construction work reading.