AUD/USD: minor recovery to be faded ahead of 0.7400 handle?

Currently, AUD/USD is trading at 0.7385, up 0.56% on the day, having posted a daily high at 0.7396 and low at 0.7339.

• US stocks slide during opening hour of trade

AUD/USD is gaining midweek after a poor start in May dropping from 0.7555 to 0.7328 the low so far this month. Retail sales was a disappointment hurting the major commodity currency that had been suffering in the wake of weaker metal prices and a stronger dollar, but the minor correction is in place today following not only a well received Aussie budget earlier in the week but improved prices in Dalian iron ore that closed up 2.6% in China on Wednesday. However, should metals remain under pressure, rallies could well be faded and indeed the DXY is rising steadily again towards the close of 99.65.

• Gold clings to gains near $1,220/oz

AUD/USD levels

Analysts at Commerzbank explained that AUD/USD’s near-term outlook is still negative. Their initial downside target is the base of a 17-month converging triangle at 0.7294. "This is a MAJOR breakdown point for the AUD and we would allow it to hold the initial test, we note the 13 count on the daily chart and have opted to exit remaining shorts. Failure here will trigger losses towards the 0.7161 December 2016 low." However, on a more optimistic outlook, a break higher targets 0.7420 and the 200 EMA that meets the double top of 5th and 8th May. A break there opens the 0.7400 target area for a more neutral position.