AUD/USD drops back towards 0.7300 on Aussie Retail Sales, coronavirus woes
- AUD/USD takes offers to refresh intraday low on downbeat Aussie data.
- Australia Retail Sales dropped -1.8% in June versus -0.5% expected.
- Market sentiment remains sluggish as covid woes battle stimulus hopes.
- 50% of Australia locked down due to virus, Sydney marks 40% jump in daily infections.
AUD/USD reverses the early Asian recovery to restore the downtrend around 0.7330 following the release of Aussie Retail Sales data. Also weighing on the quote could be the latest coronavirus updates from the Pacific major.
The preliminary readings of Australia Retail Sales for June dropped way below -0.5% and -0.1% previous readouts to -1.8% MoM. Earlier in the day, Australia Westpac Leading Index for June dropped below -0.06% prior to -0.07% MoM.
Read: Aussie Retail Sales worst than expected, AUD slides to fresh session lows
Not only the recent data but negatives for the Aussie economy, mainly due to the Delta covid variant, also weigh on the AUD/USD prices.
Yesterday’s fresh lockdown in South Australia suggests that over half of the nation witnesses, unfortunately, the virus-led activity restrictions. On the same line, Victoria’s covid count recently jumped from 15 to 23 whereas New South Wales marked a notable hike from 79 to 112 in the daily infections, per ABC news.
Following the downbeat updates, Reuters poll suggests Australia's Q3 GDP to +0.1% versus +0.9% previous forecast. Additionally, Morgan Stanley also reiterates bearish bias for AUD/USD towards 0.7000, with a stop near 0.7800, due to the pandemic-hit economics.
It’s worth noting that optimism surrounding US President Joe Biden’s infrastructure spending bill and hopes of a strong Q2 earnings season could be cited as the key catalyst for the latest cautious risk-on mood. Also on the positive side were the increasing odds for the Fed policymakers to defend easy money amid Delta covid strain woes.
Amid these plays, S&P 500 Futures print 0.15% intraday gains while the US 10-year Treasury yields extend the previous day’s rebound from February lows, up to one basis point to 1.218% by the press time. Further, the US Dollar Index (DXY) remains firm for the fifth consecutive day to challenge April’s top.
Looking forward, virus updates and stimulus news could entertain the AUD/USD bears wherein the US dollar strength will be the key.
Technical analysis
Failures to cross 0.7340-45 immediate upside hurdle, comprising tops marked in September–November 2020 to October 2020 high, keeps AUD/USD bears directed to October 2020 high near 0.7170. It’s worth noting that the recovery moves, if any, require 0.7410-15 breakout, including late 2020 peak and early July 2021 low, to be considered promising.
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.
