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  • AUD/USD takes a U-turn from 0.7555 after early Asia’s corrective pullback.
  • Market sentiment stays sluggish amid Brexit, virus concerns, headlines from US recently add to the risk-off mood.
  • China’s reaction to WTO comments will join the existing challenges to the risk.

AUD/USD drops to 0.7438 while trimming the early gains during Wednesday’s Asian session. The aussie pair’s latest declines could be traced from the recent risk aversion wave that took clues from the US and the UK headlines.

Traders recently turned skeptics as the US Homeland Security Department issued a warning over the use of data linked from Chinese companies. Axios said, “to warn US companies of the risk of Chinese government-sponsored data theft that can occur through US business partnerships with Chinese companies, or through the use of their products and services.”

It should be noted that President Trump’s recent comments raising doubts over the US aid package, already passed by the Congress, add challenges to the sentiment. The outgoing US leader said, “The covid-spending bill has unnecessary components” while asking Congress to amend the bill.

Elsewhere, chatters over more stringent activity restrictions in the UK, due to the coronavirus (COVID-19) and the virus variant, joins the Brexit woes and US President Donald Trump’s pardoning of 15 people, also challenge the mood.

At home, the World Trade Organization’s (WTO) acceptance of complaint filed against China’s tariffs on Aussie barley exports could escalate the Canberra-Beijing tussle.

Against this backdrop, S&P 500 Futures drop 0.30% while the US 10-year Treasury yields remain pressured towards 0.90%.

Although risk catalysts are likely to keep the reins, the US data concerning Durable Goods Orders, Michigan Consumer Sentiment and Weekly Jobless Claims can offer intermediate clues. Overall, the US dollar strength is likely to weigh the AUD/USD prices.

Technical analysis

Lower high formation since last Thursday joins a daily closing below 10-day SMA to direct AUD/USD prices towards a confluence of 21-day SMA and an upward sloping trend line from November 05, at 0.7470 now. Alternatively, buyers are likely to look for entries beyond the 0.7600 round-figure.