• AUD/USD saw some short-covering moves and sustained USD selling.
  • US fiscal stimulus hopes lifted investor’s confidence and undermined the safe-haven USD.
  • Dovish RBA expectations could limit gains.

The AUD/USD hit day’s high in the early US session. Bulls now looking beyond 0.71.

Hopes that US lawmakers will arrive at an agreement over a new covid relief package is improving the mood in the market.and undermining the US dollar’s relative safe-haven status. Meanwhile demand for riskier currencies, including the Australian dollar rose.

US President Trump indicated that he was willing to accept a larger aid bill. This raised hopes for a bipartisan-deal on a relief package before the November 3 election. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin will continue talks on Wednesday.

Investors are still cautious over the passage of the legislation given the level of opposition from within the Trump Republican Party. This caution was reflected in the equity markets, which could cap gains on any strong AUD/USD rally.

Rising expectations that the RBA will cut interest rates in November could keep investors from placing aggressive bets. Waiting for strong follow-through buying before buying the AUD/USD pair could be prudent