- A combination of factors continued exerting some pressure around AUD/USD on Monday.
- Dovish RBA expectations, escalation of trade tensions with China weighed on the aussie.
- The US political uncertainty might help limit any deeper losses for the pair, at least for now.
The AUD/USD pair remained depressed through the early European session and was last seen hovering near the lower end of its daily range, or over three-month lows set earlier this Monday.
Despite upbeat Chinese manufacturing PMIs, the China-proxy Australian dollar struggled to gain any meaningful traction, instead was pressured by escalating tensions with its key trading partner. It is worth reporting that China banned imports of Australian timber from Queensland over the weekend.
Adding to this, reports indicate that Chinese importers are readying themselves for another round of curbs on Australian trade items, including bans on copper ore, copper concentrate and sugar, expected to be introduced this week. This further strengthened the case of additional easing by the RBA.
The Reserve Bank of Australia is scheduled to announce its latest monetary policy update during the Asian session on Tuesday. The market seems to have fully priced in a cut in the benchmark interest rate and hence, the key focus will be on the language in the accompanying monetary policy statement.
On the other hand, the US dollar remained well supported by growing worries about the economic fallout from fresh coronavirus-induced lockdowns in Western countries. However, the US political uncertainty held the USD bulls from placing fresh bets and helped limit the downside for the AUD/USD pair.
Hence, it will be prudent to wait for some strong follow-through selling before traders start positioning for any further depreciating move. That said, the bias seems tilted firmly in favour of bearish traders and the AUD/USD pair seems more likely to slide further in the near-term.
Market participants now look forward to the release of the US ISM Manufacturing PMI for some impetus. This, along with developments surrounding the coronavirus saga, will influence the USD price dynamics and produce some short-term trading opportunities later during the early North American session.
Technical levels to watch
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