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The Australian and New Zealand dollars bounced on Monday thanks to a turnaround in the Chinese yuan, although resistance was stiff ahead of a key reading on Australian inflation due later in the week.
The Aussie rose 0.4% to $0.6541, having dropped 0.8% on Friday to as low as $0.6511 in part due to a sudden drop in the Chinese yuan. It fell 0.7% last week to break below the 21-day and 200-day moving averages.
Resistance is around $0.6553.
The kiwi also edged up 0.2% to $0.6007, moving away from a four-month low of $0.5986 hit earlier in the session. It fell 1.5% last week as the unexpected weakness in the New Zealand economy reinforced market expectations of about three rate cuts this year.
Resistance is around $0.6040.
The People's Bank of China on Monday guided the Chinese yuan higher at 7.0996 per dollar, 1271 pips firmer than a Reuters estimate, signalling little tolerance for the yuan to ease much further. State banks also stepped in with dollar selling.
That drove a rally in the offshore yuan, which has reversed most of the losses it suffered on Friday. The Australian dollar is often sold as a liquid proxy for the yuan, reflecting Beijing's position as the largest buyer of Australian resources.
"AUD/USD is now teetering on its uptrend, with price and momentum indicators suggesting the risk of a break is growing," said David Scutt, a market analyst at City Index.
"AUD/USD looks horrible on the charts, topped off by a death cross being generated to start the trading week."
Joseph Capurso, head of international economics at Commonwealth Bank of Australia, expects the Aussie to consolidate until the monthly inflation report on Wednesday, although he noted there was a risk that it could dip below 64 cents given the weakness in the yuan.
Economists expects inflation likely picked up to an annual rate of 3.6% in February because more data on the services sector is available in the second month of the quarter. That compared with the two-year low of 3.4% in January.
The Aussie stayed elevated against the Japanese yen, climbing 0.2% to 98.86 yen, having hit a nine-year high of 100.18 yen last week. (Reporting by Stella Qiu; Editing by Jamie Freed)