AUD/USD hits 1-week lows on China’s retaliatory tariffs, below mid-0.6700s ahead of Powell

• China’s retaliatory tariffs exerted some pressure on the China-proxy Aussie.
• A modest USD pullback helped limit deeper losses ahead of Powell’s speech.

The AUD/USD pair finally broke down of its daily consolidative range and dropped to over one-week lows, farther below mid-0.6700s during the early North-American session.
 
The latest leg of a sudden drop over the past hour or so came after China announced to levy retaliatory tariffs on another $75 billion worth of US goods. The move was seen as a further escalation in the US-China trade conflicts and turned out to be one of the key factors exerting some pressure on the China-proxy Australian Dollar.

Double whammy for China-proxy Aussie

The latest trade development further dampened investors’ risk appetite and the same was evident from a sharp intraday slide in equity markets, which further collaborated towards driving flows away from perceived riskier currencies – like the Aussie, albeit an intraday US Dollar pullback helped limit the downside.
 
The greenback failed to preserve early gains and witnessed some selling in reaction to dovish comments by St Louis Fed President James Bullard, saying that there will be a robust debate about 50 bps cut at next meeting and that lower interest rates would help us hit the inflation target.
 
This coupled with the fact that investors now seemed reluctant to place aggressive bets ahead of the Fed Chair Jerome Powell’s scheduled speech at Jackson Hole Symposium could also be one of the reasons behind the lack of any strong follow-through selling pressure around the major, at least for the time being.

Technical levels to watch