AUD/USD: Depressed above 0.6800 ahead of China data
- AUD/USD begins the week with a gap-down opening to 0.6843.
- Risk sentiment remains heavy amid rising fears of the coronavirus second wave.
- The aftershocks of Fed Chair’s pessimism still trouble the traders.
- Aussie PM’s speech, China’s Industrial Production, Retail Sales in the spotlight.
AUD/USD dropped 20-pips from Friday’s close of 0.6864 to kick-start the week around 0.6843. The quote takes rounds to 0.6840 during the early morning in Asia. The recent comments from the Dallas Fed President Robert Kaplan sound optimistic. Even so, the traders are yet to overcome the previous pessimism caused by fears of economic weakness and another wave of the coronavirus (COVID-19) outbreak.
Fears of virus 2.0 stay on the cards…
In addition to the news that Tokyo reported the highest numbers of COVID-19 cases since May 05, by 47 on Sunday, Beijing’s partial shutdown also renew the fears of the pandemic. From the US side, California marked a bit softer rise in the cases but Texas reported record hospitalizations.
Other than the virus, protests in the US also weigh on the market’s risk sentiment. During the weekend, US President Donald Trump said on Fox Business that We won't let Seattle be occupied by anarchists. On the contrary, New York Governor Andrew Cuomo said, as per The Hill, that the police can't police a community that doesn't trust them and doesn't respect them. It won't work.
Elsewhere, the Fed’s Kaplan sound optimistic about the improvements in the US job growth, starting from June. However, he still holds a downbeat view of the unemployment rate when observed yearly.
It’s worth mentioning that the markets remain risk-averse during the last week, which in turn pushed the Aussie pair to part ways from the previous three-week winning streak.
Read: Forex Today: Risk aversion to keep leading the way
Moving on, Australia’s Prime Minister Scott Morrison is up for speaking at the National Press Club on Monday morning. While the Aussie leader is expected to announce additional infrastructure spending, any comments on the economy and/or the latest tussle with China might not refrain from moving the quote.
Additionally, China’s May month data dump, up for publishing at 02:00 GMT, will also be the key to follow. An extended recovery in the Industrial Production, Retail Sales and Fixed Asset Investment is what the market sees for today’s readouts from Beijing. Forecasts suggest the Industrial Production could rise from 3.9% prior to 5% whereas Retail Sales might improve from -7.5% to -2%. Further, the Fixed Asset Investments could also recover from -10.3% to -5.9%.
Technical analysis
The Aussie pair’s failure to offer a daily closing below an ascending trend line from March 19, at 0.6815 now, can again push it towards the mid-January top nearing 0.6935. Though, the pair’s further upside could be restricted by 0.7000 threshold. Meanwhile, a sustained downside break below the said support line will have to travel through the tops marked in February and March, respectively around 0.6775 and 0.6685, to revisit the 200-day SMA level of 0.6665.
Author
Anil Panchal
FXStreet
Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.
