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  • AUD/USD stays depressed after posting the biggest losses in two weeks.
  • Fed Chair Powell pushed for fiscal push, US President Trump called off stimulus negotiations with Democrats.
  • Doubts over Trump’s health, Brexit pessimism add to the market’s pessimism.
  • RBA left door open to further easing, Australian budget offered tax cuts, A$213.7 billion deficit expected.

AUD/USD sellers catch a breather while hitting the 0.7100 threshold, the lowest in a week, at the start of Wednesday’s Asian session. The aussie pair lost over 100 pips during the previous day’s fall as risk aversion worked at full steam after US President Trump closed the door for bipartisan aid package talks. Earlier on Tuesday, RBA stood pat on policy measures with readiness to act whereas the Australian budget forecasted heavy deficit when offering tax cuts.

Trump has the power…

Be it the news of Trump’s discharge from the hospital or his gasping, not to forget the dislike for Democrats and straight ‘NO’ to any further stimulus calls, the US Republican leader is a game-changer. Global market sentiment turned heavy after the White House boss poured cold water on the face of expectations that the US Congress members will soon break the stimulus deadlock. The disappointment grew stronger as Federal Reserve Chairman Jerome Powell also showed his disappointment over the lack of fiscal help earlier in the US session.

It should additionally be noted that hints over further delay in the Brexit talks and the coronavirus (COVID-19) woes in the developed economies are an extra burden to the market’s downbeat performance. Analysts at the Australia and New Zealand Banking Group (ANZ) said, “Cases numbers have lifted in 34 US states in the past month hitting states in the Midwest and Northeast. Officials are concerned cooler weather and reopening of schools will spread the disease more quickly. Case numbers are also on the increase in Europe with numbers lifting in German and Italy.”

Against this backdrop, Wall Street benchmarks slumped over 1.0% each whereas the US 10-year Treasury yields dropped 2.8 basis points to 0.734% by the end of Tuesday’s North American session.

Talking about the economics, Australia’s AiG Performance of Services Index for September dropped to 36.2 versus 42.5 prior. On Tuesday, the US JOLTS Job numbers followed downbeat Aussie trade data for August.

On a slightly different note, the RBA’s readiness to keep the easy money on the table triggered marked expectations of a rate cut next month. As a result, traders forgot about income tax relief offered by Scott Morrison and Co.

Looking forward, the Asian calendar has a few data, majorly from Japan, to entertain the traders. The same could push AUD/USD further towards the south in an absence of any fresh data/news. Though the risk catalysts are in the driver’s seat and hence any surprises won’t be taken lightly as well.

Technical analysis

Having marked another reversal from 21-day and 50-day SMAs, also breaking down past-10-day SMA, AUD/USD is inching closer to an ascending trend line from June 15, at 0.7025 now. Though, the September 25 top near 0.7085 can offer immediate support. Alternatively, an upside clearance of 10-day SMA, currently around 0.7115 can portray another attempt to cross the key resistance area around 0.7195-0.7205.