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  • AUD/USD steps back from 0.6668, prints the third failure to stay strong above 0.6650 in a week.
  • Risk-tone remains positive as equities cheer hopes of further stimulus, economic restart.
  • RBA’s Lowe praised economic package, sees signs of bottoming out in the labor market.
  • Australian Private Sector Credit, US-China rivalry could offer immediate direction.

Having marked yet another failure to stay strong beyond 0.6650, AUD/USD remains depressed around 0.6640/35 at the start of Friday’s Asian session. While the rally in equities and upbeat comments from the RBA Governor Philip Lowe favored the earlier rise, the latest pullback seems to have taken clues from the rivalry between the US and China.

Equities chose to focus on good news…

While the tussle between the world’s two largest economies remains intact, neither there prevails any optimism on the data side, stocks perform better amid increasing odds of additional financial support suggested by the global central bankers. Also favoring the mood could be the optimism surrounding major economies’ re-open and efforts to find the cure of the coronavirus (COVID-19).

In addition to the previous day’s signals concerning the possibilities of Quantitative Easing (QE) by the New York Fed President John Williams, downbeat comments by the Dallas Federal Reserve Bank President Robert Kaplan strengthens calls of further stimulus from the US central banks. Not only the US policymakers but the central bank members from Europe and the UK also cited further support to come, which in turn offered strength to the global share market.

It’s worth mentioning that the RBA Governor Lowe also sound optimistic during his COVD-19 speech before the Senate Select Committee on Thursday.

Fears of US-China enmity keep bulls in check…

Following Thursday’s bill that proposes the US sanctions on the Chinese diplomats involved in the Xinjiang case, US President Donald Trump recently said to hold China news conference on Friday. The Republican leader has already conveyed earlier that sanctions will be coming for the Asian major by the end of the week.

Against this backdrop, Wall Street manages to keep the bulls happy whereas the US 10-year Treasury yields also flashed gains around 0.70%.

Traders may now look towards Australia’s Private Sector Credit for April, prior 3.6% on YoY, for immediate direction while also keeping eyes on the US-China updates.

Technical analysis

While observing the RSI pattern on the daily chart, it becomes clear that the oscillator forms a bearish divergence since late-April. This suggests buyers becoming skeptical over further upside, which in turn could give room for the bears’ entries. However, the pair needs to slip below the immediate supports, namely a nine-day-old support line at 0.6580 and 100-day SMA around 0.6485, to welcome the sellers. On the upside, a clear break above the 200-day SMA level of 0.6660 will provide another push towards 0.6700 round-figure.