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GBP/AUD spot rate at time of writing: 1.8247Bank transfer rate (indicative guide): 1.7608-1.7736FX specialist providers (indicative guide): 1.7973-1.8083More information on FX specialist rates hereThe Australian Dollar was at risk of declining to a two-month low after testing an important level of technical support on Wednesday, but a somewhat widely anticipated correction could find itself limited by further weakness in the U.S. Dollar and strength in the Euro over the coming weeks.

Australia's Dollar was among the worst performing major currencies Wednesday having been trailed only by the New Zealand Dollar and safe-haven Yen.

This was after the Reserve Bank of New Zealand (RBNZ) increased its maximum limit for purchases of local government bonds in what was a blow for the Kiwi and domestic yields.

"AUD followed NZD lower and is trading near 0.7120. The fall in gold prices and soft Australian data added to the downward pressure on AUD. In Australia, wages rose just 0.2%/qtr in Q2 20. The annual rate slowed to 1.8%/yr, the slowest rate in the 22 year series. Wage freezes and the sheer size of excess labour supply are expected to depress wages growth in the coming year," says Kim Mundy, a strategist at Commonwealth Bank of Australia.

AUD/USD losses were fractional however, as a resilient EUR/USD rate prevented meaningful gains in the U.S. Dollar Index.

Above: AUD/USD shown at daily intervals alongside Euro-to-Dollar rate (orange line, left axis).

Price action came amid declines for recently rampant gold prices, increases in depressed major economy bond yields and ahead of a U.S. review into China's compliance with the terms of a January 'phase one deal' that largely ended the trade war between the world's two largest economies.

The outcome of the review is expected by August 15 and at worst could see the agreement torn up, stoking risks of another tariff fight and placing a further question mark over global economic recovery prospects.

"White House economic advisor Larry Kudlow downplayed concerns overs over the US-China trade deal amidst rising geopolitical tensions. He stated “one area we are engaging is trade” and described the phase one trade deal as “fine right now”. China continues to promise to complement the trade deal and evidence showed the country was increasing purchases, especially commodities. The comments provide reassurance ahead of upcoming talks," says Lee Hardman, a currency analyst at MUFG.

The Aussie is negatively correlated with a Dollar Index that was unable to advance meaningfully Wednesday due to the resilience of EUR/USD, which accounts for more than one half of flows measured by the benchmark.

Above: AUD/USD shown at daily intervals alongside Dollar Index (black line, left axis).

In the current market environment where the U.S. Dollar is increasingly reviled among investors and analysts, a resilient EUR/USD rate is the minium that's required in order for depreciation pressures on the Turkish Lira and other emerging market currencies to be maintained.

Emerging market currencies were softer on Wednesday but the Turkish Lira was sold heavily, driving strong gains in USD/TRY that necessitate a resilient EUR/USD if USD/TRY and EUR/TRY are to remain in line.

These emerging world depreciation pressures would place a mechanical limit on the declines seen by the Aussie in the event that recent correlations with the Dollar Index and Euro are sustained.

"AUD/USD has started to erode the 20 day ma at .7129 (only just!) and is downside corrective near term. We have the December high at .7031 and the 4 month uptrend at .6921 and these are our near term targets, Key support is offered by .6778/74, the February high and mid-June low. This latter level is reinforced by the 200 day ma at .6709 and could be reached within this correction lower," says Karen Jones, head of technical analysis for currencies, commodities and bonds at Commerzbank.

Above: AUD/USD shown at daily intervals with 55-day (red) and 200-day (green) moving-average.

AUD/USD has repeatedly failed in attempts to break sustainably above 0.72 since the end of July after the rally off March lows slowed markedly between early June and the end of last month, leading technical indicators of momentum on the charts to warn of a correction lower.

But the Aussie has also been highly resistant to attempts at pulling it lower, leading to weeks of trading within a narrow 0.71-to-0.72 range, although technical support at 0.7129 was at risk of giving way Wednesday.

Only time will tell if that loss of support drives a more protracted correction although Commerzbank's Jones says that such a scenario could utlimately see AUD/USD retreat back to its 200-day moving-average near to 0.67.

Others see recent price action as a consolidation ahead of an anticipated advance higher by the Aussie.

"We keep our core bullish outlook following the completion of a large “head & shoulders” base, but stay poised for a lengthier consolidation phase prior to the broader uptrend eventually resuming. Resistance is initially seen at .7195, removal of which would suggest a fresh test of the aforementioned .7243/72. Removal of can bring the current consolidation phase to an end to reassert the uptrend with resistance next at .7284/95," says David Sneddon, global head of technical analysis at Credit Suisse.

Above: AUD/USD shown at daily intervals alongside Euro-to-Australian Dollar rate (black line, left axis).

If current correlations between the Aussie, Dollar Index and Euro are to remain in place then a protracted AUD/USD downtrend might be highly unlikely without a recovery in Turkish exchange rates, which many analysts say would first require a change of direction for the country's interest rate policy.

Without such a turnaround the Lira could remain under pressure, which would see USD/TRY and the more important EUR/TRY continuing to rise, although its increases in this latter exchange rate that require as a minimum, resilience from EUR/USD if not further advances.

Combining a rising EUR/USD with a range-bound AUD/USD would produce steady increases in EUR/AUD, which is exactly what analysts at Westpac are looking to see in the remaining weeks to the end of September.

"The Australian dollar outpaced all G10 currencies in Q2 as risk appetite rebounded and Australia’s coronavirus outlook seemed very promising. So far in Q3 however, the Aussie’s performance has been quite mixed, with the euro among the G10 currencies gaining on A$. Euro outperformance appears to be at least partly inspired by the July agreement on the EU Recovery Fund," says Sean Callow, a strategist at Westpac. "We assume that the optimism over European cooperation persists for now, leaving EUR/AUD trending towards 1.67 by September, but with the Aussie then grinding higher in Q4 and in 2021."