AUD/USD: Coronavirus woes slow down bulls below 0.7000

AUD/USD kick-starts Wednesday’s trading session by struggling to extend the latest recovery moves from 0.6938 while taking rounds to 0.6950. The quote snapped a multi-day run-up the previous day while reversing from 0.6998. However, its following recovery moves from 0.6921 failed to last longer than 0.6979.

The coronavirus (COVID-19) resurgence in top-tier global economies, including Australia, recalls the fear trades and dragged the risk barometer the previous day. Also portraying the sentiment was the US dollar index (DXY) which bounced off a two-week low amid upbeat data and safe-haven demand. Furthermore, RBA’s grim economic outlook added weakness into the AUD/USD pair on Tuesday.

Pandemic plays it hard…

Be it a six-week lockdown in Melbourne and surrounding cities or record-breaking virus figures from the US, crossing three million mark, global economies have recently been hit by the pandemic’s resurgence. Additionally, Tokyo marked over 100 cases for the fifth day in a row whereas situations in India are also worrisome. On the contrary, Beijing registered zero cases while also announcing a third trial of the vaccine in Brazil. However, the US health official Dr. Fauci has poured cold water on the face of expectations that any cure can stop the pandemic.

Elsewhere, the US-China tussle remains on the table with the recent announcement from US Secretary of State Mike Pompeo stating visa restrictions for some Chinese officials over Tibet. Furthermore, the dragon nation keeps its hard stand against American and the UK when it comes to opposing the ban on Huawei and fighting against the Hong Kong security law.

Amid all these plays, Wall Street bulls catch a breather after the previous day’s stellar performance while the US 10-year Treasury yields also revisited sub-0.65% area, down 4.4 basis points (bps).

It should also be noted that the Reserve Bank of Australia (RBA) announced no change to its record low interest rate of 0.25% and earlier announced Quantitative Easing (QE) during the July month’s monetary policy meeting. However, the central bank cited economic fears, due to the deadly disease, while also showing readiness to keep the policies easy for the time being. On the other hand, upbeat US JOLTS Job Openings, 5.397M versus 4.85M expected, offered additional support to the greenback.

Looking forward, a light economic calendar highlights the virus headlines and Sino-American news as the key catalysts.

Technical analysis

Tuesday’s bearish spinning top signals the traders’ indecision but the pair’s sustained trading above key SMAs, the 21-day SMA level around 0.6900 being the nearest support, keeps buyers hopeful. Though, 0.7000 threshold becomes important to watch for fresh long positions.