AUD/USD: Bears eye key support below 0.7100 ahead of China GDP

• AUD/USD consolidates losses below 0.7100 after snapping a two-week uptrend.
• Trading sentiment remains challenged amid extended US stimulus deadlock, Brexit and virus woes.
• RBA’s dovish rhetoric, China’s tough stand against the global dislike also favor bears.
• Chinese Q3 GDP, September month data dump will join risk catalysts to please the momentum traders.

AUD/USD recovers from an intraday low of 0.7071 to 0.7085 amid the initial hours of Monday’s Asian trading. The aussie pair consolidates the latest week’s heavy losses, the first in the previous three, while battling with the challenges to market risks. Among the leading ones, US aid package stalemate and the coronavirus (COVID-19) woes join the Sino-America and China-Australia tussle to weigh on the quote.

Bears haven’t gone home…

Despite the extension of late Friday's risk recovery, mainly backed by the upbeat US data, AUD/USD bulls are finding it hard to retake the controls. The reason could be traced from no clarity over the US COVID-19 relief package as well as the further worsening of the pandemic in Europe. Additionally, China’s fight against the world, recently for export of controlled items, also weighs on the market’s mood and the pair.

Having initially banned Aussie coal and cotton, China recently passed a law to limit exports of its controlled items. This shows Beijing’s readiness to combat global criticism to dump the markets with exports and should heavy the risks. Elsewhere, US House Speaker Nancy Pelosi gave time till Tuesday night to the White House for reaching an agreement over the relief package. While the news should raise hopes of the much-awaited stimulus, fears that the Democratic-Republican will remain and may not offer any results ahead of the Presidential elections prevail.

Against this backdrop, S&P 500 Futures print 0.30% gains to 3,475 by the time of the press.

It’s worth mentioning that Friday’s US Retail Sales and Michigan Consumer Sentiment Index favored the market’s risk-tone with upbeat prints for September and October months respectively. As a result, AUD/USD traders will keep eyes on China’s third-quarter (Q3) GDP, expected 5.2% YoY versus 3.2% prior, to extend the recent shift in the market’s mood. Also likely to favor the bulls are September month’s Industrial Production and Retail Sales from Beijing. The figures are anticipated to rise from 5.6% and 0.5% respective priors to 1.8% and 5.8%.

It should, however, be noted that the challenges to risk stand tall to keep the AUD/USD bulls tamed and hence any surprise negative news can dim the data impact to favor the bears.

Technical analysis

A clear break of 100-day SMA gains support from downward sloping RSI, not near to oversold conditions, to direct bears towards a four-month-old support line, at 0.7049 now. Also acting as the key rest-point is the 0.7000 threshold. On the upside, a clear break of 0.7100, comprising the said SMA, may push AUD/USD prices towards the 0.7205/12 area including 50-day SMA and a falling trend line from September 01.