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  • AUD/USD kick-starts the week with a downside gap of nearly 10 pips.
  • Risks sour as Treasury-Fed tussle joins increasing covid cases.
  • Vaccine hopes, gradual reduction in Australia’s virus-led restrictions stand positive for the pair.
  • Preliminary activity numbers for November can offer extra entertainment.

Having dropped to 0.7302 at the start of the week’s trading in Asia, AUD/USD wavers around 0.7300 during the initial hour of movement. The aussie pair cheered the US dollar weakness, coupled with improvement in the coronavirus (COVID-19) conditions at home, on Friday. However, the broad pessimism concerning the covid resurgence and the tension between the US Federal Reserve and Treasury Secretary Steve Mnuchin capped the pair.

Bulls and bears jostle amid US dollar weakness…

Although mixed catalysts question the AUD/USD pair traders off-late, the broad US dollar weakness has been favoring the quote. Among the many factors that negatively affect the USD, the COVID-19 outbreak has been the major one. As per the latest update from the Wall Street Journal (WSJ), new daily infections in the US fall on Saturday by 17,990 from a daily record set Friday. However, the hospitalization continues to set records every day since November 10.

Other than the COVID outbreak, the tension between the US Treasury and the Fed, relating to the recall of $500 billion provided for emergency lending programs, also weigh on the market’s risk-tone.

On the positive side, Australia has recently started taking back the virus-led activity restrictions while also suggesting additional fiscal help to the companies at home. Recent comments from the Aussie Treasurer Josh Frydenberg indicate an extension to the business tax break. Furthermore, Joe Biden’s close reach to the White House also offers a distant positive for the markets.

Against this backdrop, Wall Street closed in red while the US 10-year Treasury yields also dropped 3.1 basis points (bps) to 0.824% by the end of Friday.

Looking forward, risk catalysts like virus updates and hints for stimulus, coupled with the latest tension in the US relating to the $500 billion recall, will keep the driver’s seat. However, the preliminary prints of the November month’s activity numbers can offer immediate direction. Among them, the Commonwealth Bank’s (CBA) PMIs will become the first ones to watch.

Technical analysis

Although a one-week-old symmetrical triangle, on 4H, restricts AUD/USD moves between 0.7320 and 0.7265, the monthly high and the previous support line stretched from November 02, around 0.7340/45, becomes a tough nut to crack for buyers. Meanwhile, a downside break of 0.7265 can quickly drag the quote to 0.7220 horizontal support comprising November 12 low and high marked on November 04.

 

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