- AUD/USD pulls back from 0.7064, the lowest since September 28 flashed on Thursday.
- RBA’s Lowe rings bearish alarms, supersedes better than forecast Aussie jobs report.
- Coronavirus cases mark record weekly jump in Europe, US policymakers accept odds of no stimulus before the election.
- With a light calendar ahead in Asia, risk factors will be the key.
AUD/USD keeps recovery moves from 14-day low while taking rounds to 0.7100, currently around 0.7096, at the start of Friday’s Asian session. RBA Governor Philip Lowe set the tone of the most bearish day in three weeks, before bouncing off 0.7064, followed by the coronavirus (COVID-19) woes in Europe and on-going stimulus deadlock in the US. Further to disappoint the pair buyers were the fresh Sino-American tensions and China’s downbeat inflation data.
RBA, COVID-19 and the rest decorate the bears’ party…
Reserve Bank of Australia’s (RBA) Governor Philip Lowe emphasized the need to purchase longer-term bonds and keep the rates low for at least three years, not to forget showing readiness to cut benchmark to 0.10% if needed, during this Thursday’s speech. Following this, Bloomberg came out with the forecasts suggesting a rate cut in the next month’s monetary policy meeting, offering an additional burden to the AUD/USD prices.
The bears were strong enough to ignore better than expected, weaker than prior, employment statistics for September as the US-China and Aussie-Sino tussles returned to the table. While the White House friendship with Taipei irritates Beijing, the dragon nation recently added Australian cotton into the “NO” list, after banning wines, meat and coal, for domestic businesses. Also exerting downside pressure on the quote could be China’s dismal prints of Consumer Price Index (CPI) and Producer Price Index (PPI) for the previous month.
The COVID-19 wave 2.0 proved the fears of having a much larger size with its latest updates, which in turn threatens market sentiment in anticipation of economic woes. European countries are worst hit with record daily new cases in Germany and stricter activity controls in the London area. Further, numbers from Wisconsin, US also start flashing red signals.
Elsewhere, US Senator Majority Leader McConnell promised to offer the much-awaited stimulus after the presidential election if policymakers fail to reach any deal before then. In doing so, the Republican member tried to pitch for President Donald Trump by saying, “He is talking about a much larger amount for coronavirus relief than I can sell to my members’ in the senate.” Democrats also passed the bucket of blame as House Speaker Nancy Pelosi renewed hopes of the much-awaited stimulus by saying that the “relief will not wait until January”.
Against this backdrop, Wall Street closed in red but the US 10-year Treasury yields gained 1.7 basis points to 0.739%. Further, the US Dollar Index (DXY) also surged to the highest in three weeks amid safe-haven demand.
Looking forward, the Asian economic calendar is mostly silent and hence further retracement can’t be ruled out. However, risk catalysts remain negative to the bullish sentiment, which in turn requires a cautious view.
Technical analysis
Another failure to close below 100-day SMA, currently around 0.7093, suggests a further pullback in AUD/USD prices towards the 21-day SMA level of 0.7157.
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