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  • AUD/USD sees a fresh leg lower sub-0.7000 as risk-tone worsens.
  • Escalating Australia-China row weighs heavily on the AUD.  
  • The US dollar trades broadly firmer ahead of the FOMC.

The risk-on rally in the Wall Street overnight powered AUD/USD to fresh 2020 highs at 0.7041 but the bulls failed to sustain at higher, as the rates dropped back below the 0.7000 mark.

The move lower in the aussie below that level was mainly triggered by escalating tensions between Australia and China, concerning several issues, with the latest one being China accusing the OZ nation of racial discrimination against the Asian students.

The escalating row between the two close trading partners continues to weigh on the investor sentiment and accelerates the latest decline in the aussie dollar. China’s Education Ministry warned that Chinese students should carefully consider their decision about studying in Australia.

Meanwhile, souring risk appetite boosts the haven demand for the US dollar across the board, eventually adding to the downside in the spot. The US dollar index rises 0.16% to print daily tops at 96.78, at the press time. Also, its worth noting that the greenback also derives support from the expectations that the Fed could strike an upbeat tone on the economy on Wednesday.

Further, resource-linked aussie also suffers from some weakness in gold prices, as the yellow metals struggle to extend the bounce above the 1700 mark. Looking ahead, the pair will remain at the mercy of the Australia-China updates and USD dynamics ahead of the US JOLTS Job Openings data. The main event risk for the buck remains the FOMC decision.

AUD/USD technical levels to watch

A failed attempt above 0.7000 has again revived the sellers, with the immediate downside is seen 0.6930 (June 5 low) and 0.6900 (round figure). The upside targets are seen at 0.7000 (round number) and 0.7041 (2020 highs).

AUD/USD additional levels

 

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