- AUD/USD stays pressured after printing the heaviest losses in 12 days.
- US President Biden’s proposal for a hike in capital gain tax join Aussie-China tussle covid woes to weigh on sentiment.
- Upbeat Aussie data couldn’t recall bulls, ECB passed unnoticed.
- Commonwealth Bank’s Preliminary Activity numbers can offer immediate direction.
AUD/USD fades bounce off the week’s low, flashed a few minutes back, as declining to 0.7703 during the early Friday morning in Asia. The aussie pair registered the heaviest daily losses the previous day as risk-off mood superseded welcome economics from the Oz nation and the US as well as the European Central Bank’s (ECB) cautious optimism.
Risk catalysts are the key…
Fears of US President Joe Biden’s 40% capital gain tax for wealthier Americans dominated the late Thursday moves. In doing so, the traders ignored upbeat prints of US Jobless Claims, Chicago Fed Manufacturing Index and a pullback in Existing Home Sales.
Not only from the US but Australia’s welcome prints of National Australia Bank’s Business Confidence for Q1 2021, 17 versus 14 prior and 7 expected, were also forgotten amid fresh fears over the world’s biggest investors. It’s worth mentioning that the ECB widely matched market expectations of announcing no monetary policy change. Further details suggest that the bloc’s central bank remained cautiously optimistic but refrained from discussing taper to its bond purchases. There was no reaction to the ECB though.
Other than the US President’s plan to tax wealthier Americans to fund social spending in the forthcoming “American Families Plan”, the coronavirus (COVID-19) spread in Asia, especially in India and Japan, also dragged market sentiment. Further, China’s dislike for Australia’s rejection of the “Belt and Road” deal also adds to the risk-off catalysts.
Against this backdrop, Wall Street benchmarks dropped after breaking the curse of two consecutive daily losses during Wednesday. Further, the US 10-year Treasury yields also remained pressured to refresh the weekly low with 1.53%, near 1.54% by the press time.
Although risk catalysts are in the driver’s seat, the preliminary readings of Commonwealth Bank’s (CBA) activity figures for April will also be important to follow for fresh directions.
Technical analysis
The first daily closing below 50-day SMA, around 0.7725 by the press time, in over a week keeps AUD/USD sellers hopeful to revisit the 0.7670 and 0.7620 support levels. Alternatively, an upside break of 0.7725 needs successful clearance of 0.7760-65 hurdle to recall the buyers.
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