AUD/USD drops back below 0.7300 on China, Evergrande fears

• AUD/USD retreats from the intraday high during a three-day uptrend.
• US-China tension escalates, Evergrande share trading is suspended in Hong Kong.
• Off in China, regional holidays in Australia limit market moves, US Factory Orders eyed.

AUD/USD remains pressured around intraday low near 0.7260 amid grim concerns over the Sino-American trade relations and Evergrande during early Monday. Even so, US stimulus hopes and downbeat Treasury yields keep buyers hopeful amid partially active Asia-Pacific markets.

China’s heavy artillery sending to the Taiwan border recently teased the US policymakers. Reuters quotes State Department spokesperson Ned Price  saying, "The United States is very concerned by the People's Republic of China's provocative military activity near Taiwan, which is destabilizing, risks miscalculations, and undermines regional peace and stability."

On the same line were fears over the Sino-American phase one trade deal as CNBC relies on anonymous sources to say that US Trade Representative Katherine Tai will announce that China hasn’t complied with the phase one trade deal during her speech on Monday.

Elsewhere, Bloomberg reports, “Trading of China Evergrande Group shares was suspended in Hong Kong, along with those of its property management unit,” while citing the looming risk of Opaque bond default.

Alternatively, optimistic comments by US President Joe Biden and House Speaker Nancy Pelosi suggesting the much-awaited infrastructure spending bill will be out soon probed the bears. Additionally, Bloomberg’s piece citing China’s efforts to limit the fallout, signaling it’s willing to prop up healthy developers, homeowners and the real estate market at the expense of global bondholders, also favored the market optimists. It’s worth observing that the vaccine optimism in Australia battle the pick-up in covid infections to confuse the AUD/USD traders of late.

Amid these plays, S&P 500 Futures reverses the early Asian gains to retest 4,345 level while the US 10-year Treasury yields remain pressured near 1.46% by the press time.

Given the fresh fears concerning Australia’s largest customer China, AUD/USD bulls may witness a bumpy road amid an off in Beijing and lackluster moves at home. However, Fed tapering woes and stimulus headlines will join updates over Evergrande to entertain traders. On the calendar, the US Factory Orders for August, expected 0.9% versus 0.4%, will be important to watch. Above all, tomorrow’s RBA and Friday’s US Nonfarm Payrolls will be the key.

Technical analysis

Having failed to cross the 20-day EMA and a descending resistance line from September 07, respectively, around 0.7275-80, AUD/USD may revisit 78.6% Fibonacci retracement of August-September run-up, around 0.7170.