US dollar rises on risk aversion as coronavirus cases rise

The US dollar index rose today as traders started to price-in rising coronavirus-related risks. Similarly, global stocks declined, with the DAX index, FTSE 100, and CAC 40 falling by more than 1.5%. In the United States, the number of coronavirus deaths rose to more than 130,00 as the country confirmed more than 50,000 new cases. Meanwhile, in Australia, the number of cases in Melbourne and Victoria continued to rise leading to some travel restrictions. Therefore, traders are worried that the number of cases will continue to spread as countries reopen.

The Australian dollar eased against the US dollar after the RBA delivered its interest rate decision. The bank left interest rates unchanged at 0.25% as most analysts were expecting. It also said that it had paused asset purchases because government bond yields were below the target of 0.25%. Analysts are worried that the progress the country has made in recent months will be undone by the rising number of coronavirus cases. They are also concerned about mortgages as the September deadline of government support nears. 

The British pound declined against the US dollar because of risk aversion. Data released earlier today by Halifax showed that house price index declined by 0.1% in June as the country continued to reopen. That was slightly better than the previous month’s decline of 0.2%. The index rose by 2.6% on an annualised basis. Other data by the Office of National Statistics showed that labour productivity dropped by 0.6% in the first quarter. 

Meanwhile, in Japan, household spending declined by 16.7% in May, the sharpest decline in 11 years. Overtime pay, a good measure of how busy companies are, declined by 25.8% in May while the leading index rose from 77.7 to 79.3. In Germany, industrial production rebounded by 7.8% in May after dropping by 17.5% in April. In Italy, retail sales rose by 24.3% in May.

EUR/USD

The EUR/USD pair declined to an intraday low of 1.1260 from yesterday’s high of 1.1346. On the four-hour chart, the price is along the 50-day, 100-day EMA and 23.6% Fibonacci retracement level. It has also returned to the tip of the triangle pattern shown in white. The RSI, which was previously close to the overbought level has declined to the current level of 50. Therefore, the pair is likely to continue falling as bears attempt to test the important support at 1.1200.

AUD/USD

The AUD/USD pair declined to an intraday low of 0.6923 from yesterday’s high of 0.7000. On the four-hour chart, the price is slightly above the short and medium-term moving averages. As with the EUR/USD pair, it has re-entered the triangle pattern that is shown in yellow. The price is below the dots of the Parabolic SAR. Therefore, the pair is likely to continue falling as bears attempt to test the next support at 0.6850.

GER30

The DAX index declined to an intraday low of €12,546, which is slightly above the 50-day and 100-day exponential moving averages. The price has also moved from the overbought level of 70 to a low of 53. Also, it is along the 23.6% Fibonacci retracement level. The DAX is also slightly above the ascending trend line that is shown in white. Therefore, the bullish trend is likely to continue so long as the price remains above this trend line.