AUD/USD: Sellers attack 0.7100 as risk-aversion intensifies

• AUD/USD consolidates the latest declines from 0.7138 after snapping the four-day winning streak.
• Downbeat NAB Business Confidence, federal budget announcements mix with Wall Street’s first red in five days.
• Escalations in the US-China tension, rising virus numbers and record low US TIPS threaten market sentiment.
• Preliminary readings of Commonwealth Bank PMIs will decorate the calendar.

AUD/USD is struggling to keep the bears away while taking rounds to 0.7100, currently at 0.7095, at the start of Friday’s Asian session. The aussie pair flashed its first negative daily closing in five days on Thursday as market sentiment sours. However, the comparative weakness of the US dollar gives a good fight to the pair sellers.

Aussie traders track equities to probe the bulls…

Although the US Dollar index (DXY) remains on the back foot around the early-March lows, the AUD/USD prices failed to keep the buyers on the table on Thursday. The reason could be traced from Wall Street’s first negative closing after a four-day winning streak. Some at the floor also eye the fresh record low of the US 10-year TIPS yields, to -0.907%, as the additional barometer of the risk-off mood.

The US government’s order to Chinese Consulate, to leave the Houston, continues to heavy the risk-tone sentiment at a time when the country’s coronavirus (COVID-19) cases cross 4.0 million marks officially on Thursday. Also increasing warning the optimists were downbeat data from Washington and Canberra. Furthermore, the Aussie government’s forecast of AUD184.5bn cash deficit for the 2020/21 fiscal year and a 3.75% contraction in the current calendar year’s GDP also negatively affect the risk barometer.

Against this backdrop, the US 10-year Treasury yields slipped 1.8% basis points (bps) to 0.577% while Wall Street benchmarks marked over 1.0% losses by the end of North American session on Thursday.

Looking forward, the first readings of the Commonwealth Bank of Australia’s Manufacturing, Services and Composite PMIs for July will be the immediate catalyst to watch. Forecasts suggest the headline Manufacturing PMI extend recoveries from 51.2 to 53.6 while Services PMI may rise to 53.2 versus 53.1 earlier. It should, however, be noted that the qualitative factors like virus numbers, headlines concerning the US fiscal plan and Sino-American tension will have a higher say in the AUD/USD moves.

Technical analysis

Not only a clear break below 0.7100 threshold but tops marked in July 2019 and June 2020, respectively around 0.7085 and 0.7065, become necessary for the bears to re-enter and aim for 0.7000 psychological magnet. On the other hand, an upside clearance of 0.7150 will refill the bull’s bike to ride towards 0.7200 mark.