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  • AUD/USD stabilizes near 0.6840/50 after declining to eight-day low.
  • Market’s risk-tone remains heavy amid fears of virus resurgence and an absence of V-shaped recovery.
  • Softer than expected Aussie Consumer Inflation Expectations and US-China tension added weakness into the quote.
  • Risk catalysts to keep the driver’s seat amid a light calendar.

AUD/USD takes rounds to 0.6850, up from the recently flashed multi-day low of 0.6839, at the start of Friday’s Asian session. The quote became the bears’ favorite on Thursday amid a broad risk-off sentiment. The move down was likely clues from the US Federal Reserve’s hints pouring cold water on the face of optimists as well as fears of the second wave of the coronavirus (COVID-19). Also exerting downside pressure on the pair were soft Aussie data and the Sino-American tension.

Is it that gloomy?

Although nothing from the US Federal Reserve Chairman Jerome Powell sounds to be news except for the mildly harsh tone on what’s already said earlier, markets turned risk-averse the previous day. Fed Chair Powell did cite the fears of further darker days on the jobs front and also dimmed prospects of a V-shaped recovery but the policymaker didn’t rule out using non-conventional measures to combat the pandemic. Also, US President Donald Trump attempted additional force to challenge the market’s fear but failed.

Elsewhere, China again teases US President Trump and got a hit from Aussie PM while using coercion to stop an investigation into the virus outbreak. Further, Australia’s June month Consumer Inflation Expectations also weakened from 4.2% forecast to 3.3%.

Against this backdrop, Wall Street had the worst day of June whereas DJI30 marked the biggest losses in a few weeks. Additionally, the US 10-year Treasury yields shed another heavy part of it, 8.8 basis points, while revisiting the sub-0.70% area.

However, the current pessimism is more likely to be the pullback after the heavy rise than the broad negative phase. It should be noted that the Fed’s readiness to fight against the virus and the recent recovery in data should gain a more priority. On the contrary, the recent declines in the pair can be termed as a retracement after a heavy rise unless managing to stay for a bit longer.

Moving on, a lack of major data on the calendar will keep the traders diverted to news headlines from the US and China while also keeping eyes on the COVID-19 news for fresh impulse.

Technical analysis

Aussie bears are cheering the pair’s declines below the mid-January top. Even so, an ascending trend line from March 19, currency around 0.6800, followed February month top near 0.6775, become the key supports to watch. Meanwhile, the pair’s pullback beyond 0.6935 could restore the bulls’ confidence to challenge 0.7000 threshold.

 

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