Search ForexCrunch
  • AUD/USD sellers catch a breather after posting the biggest losses in over a week.
  • US stimulus stalemate, Aussie-China tussle and virus woes gained major attention.
  • Mixed trade numbers from China, a lack of major data at home also favor sellers.
  • Second-tier Australian economics can entertain traders but risk catalysts are the key.

AUD/USD consolidates the previous day’s drop, the heaviest in a week, while taking rounds to 0.7160 at the start of Wednesday’s Asian session. Risk aversion got a boost when the US treasury traders returned to the desk after a long weekend. Catalysts particularly highlighted were China’s Aussie coal ban and the US policymakers’ inability to agree over the much-awaited coronavirus (COVID-19) stimulus. Also getting market attention was news of further brakes in the vaccine trials and Brexit woes. Traders may look forward to Aussie Westpac Consumer Confidence and HIA New Home Sales, for October and August respectively, for fresh impulse. Though, qualitative factors will offer a clearer direction.

US dollar gets a warm welcome…

With the market’s rush for risk-safety during the first day of trading for the American players, the US dollar rose across the board on Tuesday. While portraying the move, the greenback gauge versus the major currency, US dollar index (DXY), flashed 0.50% daily gains, snapping a four-day losing streak and rising the most in three weeks. The USD gains weighed on the Antipodeans and dragged AUD/USD to the south. Also negatively affecting the pair could be downbeat performance by Wall Street and the US Treasury yeilds.

With Eli Lily joining the league of the Johnson and Johnson to halt the vaccine trials, fears of further delay in the pandemic’s cure gained momentum. The pessimism remains particularly vulnerable at a time when the COVID-19 numbers from Europe and the UK are posing threats of the national lockdowns.

On the other hand, US House Speaker Nancy dislikes President Donald Trump’s stimulus proposal, terming it significantly short, which in turn favors the odds that the American aid package will not available before the November month’s presidential election. However, the Congress member assured she is open to further negotiations and a deal will be reached soon.

It’s worth mentioning that China still remembers the Aussie Prime Minister (PM) Scott Morrison’s support for an inquiry into the virus origin that alleged Beijing. After initially turning red on Aussie wines and meat, the Asian major recently banned coal imports from its Pacific counterpart and flashing threats of further hardships from the biggest customer of Australia. This may push the RBA to return to the dovish page after recently trying to placate the bears.

Elsewhere, no-deal Brexit is becoming more favorite while the International Monetary Fund (IMF) revises up World Economic Outlook as expecting -4.4% GDP for 2020 versus -5.2% previous forecast.

Looking forward, receding consumer sentiment and further weakness in the housing data is likely to exert additional downside pressure on the AUD/USD prices. However, any surprises from the risk front could recover the previous day’s losses.

Technical analysis

Having bounced off a 13-day-old support line, as well as 61.8% Fibonacci retracement of last one week’s upside, AUD/USD may eye a downward sloping trend line from Friday, at 0.7195 now, ahead of eyeing the 0.7200 round-figures. Meanwhile, a downside break below 0.7150 will recall the October 06 low near 0.7100 on the charts.