AUD/USD: Bears firming up the grip below 0.6900 as risk appetite wanes
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AUD/USD: Bears firming up the grip below 0.6900 as risk appetite wanes

  • AUD/USD stays pressured around 0.6870, three-day low.
  • Coronavirus updates from US states rekindle fears of pandemic wave 2.0.
  • Trade wars, IMF forecasts are additional reasons to propel risk aversion.
  • Aussie calendar remains empty, trade/virus news be the key to follow.

AUD/USD seesaws in a choppy range between 0.6865-75, currently around 0.6865, at the start of Thursday’s Asian session. The aussie pair earlier flashed the biggest losses in two weeks, not to forget the first negative closing of the week, amid fears of a widespread outbreak of the coronavirus (COVID-19) in the southern US states. Also exerting downside pressure could be the pessimism concerning the trade war between the US and China as well as American targets to levy tariffs on the EU/UK goods. The pair’s latest pause in the decline could be traced to a lack of major data as well as a trading activity during the early hours of the day.

COVID-19, IMF warning and trade tensions are the main culprits…

In addition to the record hospitalization in Texas, by 7.3% on Wednesday, a jump in the virus infections in California and Florida also suggest that the world’s largest economy may regain, unfortunately, its status of the pandemic epicenter. The concerns gained additional strength as 31 US states report reproductive numbers for the deadly disease (R0) greater than 1.

Elsewhere, the International Monetary Fund (IMF) further downgraded its global GDP forecast from -3.0% in April to -4.9% for 2020. The global institute also said, “Further policy measures will be needed to contain economic damage from the virus, set the stage for the return to growth.”

Additionally, the trade wars between the US and major global economies offer an extra burden on the trading sentiment. Other than the doubts over the US-China phase-one deal, America’s signal to levy new tariffs on $3.1 billion of imports from the EU and the UK also play their roles. Furthermore, the Trump administration has ordered an anti-dumping investigation on the Asian tire exporters and added worries for the global trade watchers.

Against this backdrop, the market’s risk-tone sentiment dragged Wall Street benchmark by the end of Wednesday whereas the US 10-year Treasury yields also posted three basis points (bps) of loss near 0.67% by that time.

Given the lack of major/events up for publishing on the economic calendar, global markets will keep eyes on the trade and virus updates for fresh impetus.

Technical analysis

Although the pair’s failures to cross the mid-month top surrounding 0.6975 speak loud of its weakness, an ascending trend line since May 22, currently around 0.6850, restricts the immediate downside of the quote. It’s worth mentioning that the pair remains above the 200-day SMA level of 0.6665 since the start of the month.


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