AUD/USD: Slips below 0.7800 to refresh weekly bottom as risk-off mood backs US
|- AUD/USD posts the heaviest losses in over a week, on a slippery ground of late.
- Escalating Middle East tension joins fears of Australia losing AAA rating to favor sellers.
- Economic calendar remains light ahead of the key US CPI for April.
AUD/USD becomes the Asia-Pacific region’s most negative major pair as it takes offers around 0.7785, down 0.68% intraday, during early Wednesday. In addition to the pre-US Consumer Price Index (CPI) cautious sentiment, escalating tussles between Israel and Palestine and market chatters of Australia losing its high rating also drag down the quote.
Despite the United Nations (UN) push for peace as Gaza strip, Israel Defense Forces tweets “the largest strike since 2014.” The geopolitical tussle has so far caused around 30 deaths and is continues to weigh on the lives of the Middle East residents.
Elsewhere, the Commonwealth Bank of Australia (CBA) mentioned in its recent report that the numbers currently show the (Aussie) rating should be AA+, not AAA.
It’s worth mentioning that the mixed updates concerning the coronavirus (COVID-19) vaccines and the traders’ fears that today’s US CPI will disappoint market bulls also magnify the risk-aversion wave.
Against this backdrop, S&P 500 Futures drop for the third consecutive day, down 0.70% on a day, whereas Australia’s ASX 200 marks 0.95% intraday loss by the press time.
Moving on, nothing matters more than the US CPI data as traders fear Fed’s tapering. As a result, any signals defying these calls could renew buying strength. That said, the US CPI is expected to rise from 2.6% to 3.6% YoY in April.
Read: US Consumer Price Index April Preview: The two base effects of inflation
Technical analysis
AUD/USD drops back below the previous resistance surrounding 0.7820, also breaks the 0.7800 threshold, which in turn directs sellers toward the 0.7660 minor support. However, a confluence of 200-SMA and an ascending support line from April 01 will challenge the bears around 0.7710 afterward. Meanwhile, an upside break of the 0.7820 support-turned-resistance should direct bulls to 0.7930 hurdle ahead of the yearly peak close to the 0.8000 threshold.
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