- AUD/USD struggled to find acceptance above the 0.6200 mark and met with some fresh supply.
- Coronavirus crisis boosted the USD’s safe-haven demand and exerted some bearish pressure.
- S&P lowered the outlook on Australia’s AAA rating to negative and added to the weaker tone.
The AUD/USD pair edged lower through the Asian session on Wednesday and eroded a part of the overnight gains to over one-week tops.
The pair continued with its struggle to find acceptance above the 0.6200 round-figure mark and met with some fresh supply on Wednesday. The pair snapped two consecutive days of winning streak amid fresh concerns over increasing fatalities from the COVID-19 pandemic.
The latest optimism over the fall in the number of reported cases at the beginning of the week turned out to be short-lived after the New York state – the centre of the US outbreak – and the United Kingdom announced their highest daily death toll on Tuesday.
Investors turned cautious in the wake of the overall coronavirus pandemic situation and took refuge in traditional safe-haven currency. This eventually benefitted the US dollar and turned out to be one of the key factors weighing on the perceived riskier currency – the aussie.
The Australian dollar was further weighed down by the fact that rating agency S&P lowered the outlook on the country’s AAA sovereign debt rating from stable to negative and expects the Australian economy to plunge into recession for the first time in almost 30 years.
Meanwhile, Australia’s parliament returned to pass an emergency A$130 billion stimulus package to help cushion the blow to the economy from the coronavirus pandemic, which helped limit deeper losses and assisted the pair to hold above the 0.6100 mark, at least for the time being.
Hence, it will be prudent to wait for some strong follow-through selling below the mentioned handle before positioning for any further near-term depreciating move. In the meantime, Wednesday’s release of the FOMC meeting minutes will now be looked upon for a fresh impetus.
Technical levels to watch
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