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  • AUD/USD steps back from three-week top, in a choppy range between 0.7220 and 0.7202 off-late.
  • Risk sentiment remains positive despite US stimulus stalemate, COVID-19 woes and China’s anti-trade moves on Australian coals.
  • Wall Street remains positive, US dollar nurses losses.
  • China’s August Trade numbers will offer immediate direction, US aid package news, Beijing’s trade war update will be the key.

AUD/USD stays depressed near 0.7200, currently around 0.7206, amid the early Tuesday morning in Asia. The aussie pair took a U-turn from multi-day high and eased at the week’s start amid the partial holiday in the US and fresh challenges to the Aussie dollar, mainly from China. Although markets will be more concerned about the US coronavirus (COVID-19) stimulus updates, trade numbers from Beijing will join the virus updates and trade war headlines to direct near-term pair moves.

Fresh challenges and opportunities from the US and China…

With the news of US House Speaker Nancy Pelosi’s rejection of President Donald Trump’s $1.8 trillion COVID-19 stimulus proposal being old, the latest headlines concerning the pandemic’s spread in the US and China’s ire over the American arms sales to Taiwan may get fresh catalysts to watch. The US health official Dr. Anthony Fauci recently warned that the latest data on a rising number of the coronavirus (COVID-19) cases and projections of more deaths “jolt” the American public into reality. On the other hand, China’s Washington Embassy lashed out at the Trump administration’s push for weaponry sales to Taipei by saying, “ Beijing consistently and firmly opposes US arms sales to Taiwan.”

It’s worth mentioning that chatters about China’s other trade-negative act to punish Australian friendship with the West joins the mixed sentiment concerning the People’s Bank of China’s (PBOC) move to probe the AUD/USD buyers. Rumors generated on Monday that Beijing is secretly pushing power stations and steel mills to stop using Australian coal joined the PBOC’s removal of the FX risk reserve ratio on Monday. Also, news that China “unveiled a new comprehensive reform plan for Shenzhen,” by offering more powers to the local authorities gained the market’s additional attention.

On the positive side, the White House Physician Sean Colney said President Trump tested negative for COVID-19 for consecutive days. This comes after the health officer turned down virus transmission risk from the Republican leader the previous day.

Such news can help keep the market sentiment positive, as it has been, and favor Asia-Pacific equities to follow the footsteps of Wall Street’s upbeat performance, mainly backed by tech-rally. However, any surprises on the COVID-19 stimulus from America will be closely watched.

Other than the risk catalysts, China’s September month Trade Balance, Imports and Exports will also be important to watch. Forecasts suggest that the headline Trade Balance will expand from $58.9B to $59.9B in the stated month.

Technical analysis

As anticipated in our earlier piece, AUD/USD took a U-turn from the key 0.7245/50 resistance confluence, including a descending trend line stretched from September 01 and the 200-week SMA, followed by a test of 50-day SMA level near 0.7200. That said, the quote is currently indicating further weakness towards a 21-day SMA level near 0.7175. Though, any further upside will be tamed by a 100-day SMA level near 0.7080. Meanwhile, buyers may again attempt to cross the 0.7245/50 upside barrier on the clear break above 0.7220 immediate resistance.