- AUD/USD witnessed some follow-through selling on Monday amid the prevalent risk-off mood.
- Renewed coronavirus jitters turned out to be a key factor weighing on the perceived riskier aussie.
- A subdued USD price action extended some support and helped limit deeper losses, at least for now.
The AUD/USD pair maintained its offered tone through the early European session, albeit has managed to rebound around 30 pips from two-week lows set earlier this Monday.
The pair extended last week’s retracement slide from YTD tops and witnessed some follow-through selling on the last trading day of the week. The prevalent risk-off environment – as depicted by a sea of red across the global equity markets – weighed on the perceived riskier Australian dollar and dragged the AUD/USD pair to daily lows, around the 0.6775 region.
Against the backdrop of the Fed’s gloomy outlook, fears about the second wave of the coronavirus outbreak and the possibility of renewed lockdowns to curb the spread dampened prospects for a sharp V-shaped economic recovery. This coupled with disappointing economic data from China added to renewed coronavirus jitters and dented the global risk sentiment.
However, the downside remained limited, at least for the time being, amid a subdued US dollar price action. The downbeat market mood triggered a fresh leg down in the US Treasury bond yields, which seemed to be the only factor that held the USD bulls on the defensive and extended some support to the AUD/USD pair.
Hence, it will be prudent to wait for some strong follow-through selling before confirming that the AUD/USD pair might have already topped out. This, in turn, will set the stage for an extension of the ongoing corrective slide and pave the way for a further near-term depreciating move back towards challenging the very important 200-day SMA, around the 0.6665 region.
In the absence of any major market-moving economic releases, the global risk sentiment and the USD price dynamics might continue to play a key role in influencing the AUD/USD pair’s momentum on Monday. Meanwhile, the release of the RBA monetary policy meeting minutes, scheduled during the Asian session on Tuesday, will now be looked upon for a fresh directional impetus.
Technical levels to watch
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