AUD/USD plumbed a new 4-month low after downside misses to U.S. April import/export data depressed global bond yields in early NorAm trade and dampened risk sentiment a bit .
However, bears were unable to capitalize on this, setting up the potential for a reversal.
Even though the 61.8% Fib of 0.6715-0.7295 was pierced on the U.S. data, time spent below it was short lived with other factors limiting the downside.
A slight thaw in U.S.-Sino trade tensions and action from the PBOC on persistent yuan weakness have helped stem AUD/USD's slide for now.
Indeed, AUD/USD bears should be especially concerned with yuan weakness and how the PBOC might react.
The central bank is leery that a 7.0000 break for USD/CNH could induce capital outflows from China.
Recent USD/CNH approaches to 7.000 met stiff resistance and faced steady bear pressure thereafter.
USD/CNH pierced the 76.4% Fib of the November-March decline today but is now below it after the PBOC fixed USD/CNH lower than traders expected.
Thus, should the PBOC buoy the yuan and trade tensions ease further, AUD/USD shorts could get squeezed.
A test of 0.7065/70 and 0.7150/60 resistance zones would then be likely.