- AUD/USD stays heavy after printing the biggest daily slump in a week.
- US dollar strength, commodity weakness could be traced for the losses.
- Vaccine, stimulus hopes join Sino-American tussles and covid fears in Australia to weigh on the quote.
- Aussie Building Permits, China’s NBS Manufacturing PMI will decorate calendar but risk catalysts keep driver’s seat.
Having flashed the biggest drop in a week, AUD/USD remains on the back foot, inside a choppy range near 0.7600, during early Wednesday morning in Asia. While the strong US dollar and gold’s weakness are the main catalysts behind the moves, the coronavirus (COVID-19) fears at home also heavy the aussie pair ahead of the key activity numbers from the biggest customer China.
King Dollar dominates…
US dollar index (DXY) jumped to the highest since November 05, 2020, the previous day as global markets cheered faster recovery hopes of the world’s largest economy. Be it US President Joe Biden’s push for 90% adults’ vaccinations by April-end or the upbeat CB Consumer Confidence, not to forget hopes of $3.0 trillion infrastructure spending, America has many points to celebrate.
While US Treasury yields factored positives for America, compressing Wall Street performance, chatters surrounding escalation in the Sino-American tussle and covid fears in Europe and Australia add strength to the US dollar. Not only the US dollar strength but the recent drop in gold prices, the biggest in a month, also drags the AUD/USD prices.
Other than the aforementioned catalysts, month-end, as well as quarter-end positioning, joins fears of spill-over effects from the recent hedge fund fiasco pressure AUD/USD considering its risk-barometer status.
Although the risk catalysts are likely to remain as the key AUD/USD driver, China’s NBS Manufacturing and Non-Manufacturing PMIs for March will be the key to observe. Also important will be Australia’s Building Permits for February and US economics that will offer an active day.
“After the bigger than expected fall in February to 50.6, China's NBS manufacturing PMI is likely to increase to 51.2 (consensus 51.0) in March. Much of the weakness in February was due to seasonal factors which should dissipate in March” said TD Securities concerning China PMIs.
Above all, US President Joe Biden is up for revealing his much-debated infrastructure plan details on Wednesday and the event will move the markets and AUD/USD as well.
Technical analysis
Failures to cross 0.7700 drag the AUD/USD prices back towards the key 0.7562-57 support area, comprising multiple lows marked since December 28, 2020.
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