AUD/USD: Off lows after upbeat China data, trade tensions could cap gains

• AUD/USD has recovered losses, possibly on the back of a better-than-expected China manufacturing and non-manufacturing PMI release.
• The escalating US-China trade war could cap the upside in the AUD/USD.

The Aussie dollar has erased early losses, but big gains may remain elusive courtesy of rising trade tensions.

At press time, the AUD/USD is trading at 0.7262, having clocked a session low of 0.7244 earlier today.

The recovery from the session lows is likely associated with a better-than-expected China data release - the official manufacturing PMI for August printed at 51.3 and the non-manufacturing PMI came in at 51.0.

However, aggressive AUD bulls may remain on the sidelines on fears of a further escalation of a trade war between the US and China. After all, the US President Trump is considering moving forward with tariffs on another $200 billion worth of Chinese imports to the US and the world's second-largest economy is unlikely to take this lying down.

Further, the Italian fiscal concerns could weigh over the equities and keep the gains in the AUD under check.

AUD/USD Technical Levels

Resistance: 0.7275 (hourly chart hurdle), 0.7293 (downward sloping 50-hour moving average), 0.7310 (July 2 low)

Support: 0.7238 (Aug. 24 low), 0.7202 (Aug. 15 low), 0.7184 (61.8% Fib R of 2001 low/2011 high)