AUD/USD falls towards the bottom of the week's range, bearish bias prevails


  • AUD/USD under pressure, embarking on the week's lower bound of the range.
  • AUD pressured by trade wars, risk-off and a resurgence in the USD. 

AUD/USD is currently trading at 0.6452 and is down from a high of 0.6524 to a low of 0.6441, -0.28% at the time of writing. The US dollar is on the march today (DXY +0.18% at the time of writing) following Federal Reserve's Chairman Jerome Powell's comments. 

Firstly, it's key to note that AUD will be vulnerable to the shift in the narrative between the US, Australia and China. We are entering the realm of severe risk-off again pertaining to trade wars coming back to the fore. This time, however, Australia has joined the mix. 

Trade wars are back with a vengeance 

Australia’s call for an investigation into China’s role as the origin of the COVID-19 pandemic has pulled the tail of the dragon. This is now quickly morphing into a trade war, one of which is bound to rattle investor's nerves who are already having to contend with the prospects of major flare-ups of COVID-19 contagion. 

The Australian Trade Minister, Simon Birmingham, is seeking talks with counterpart Zhong Shan to try and settle down tensions following Beijing's move earlier this week to block imports of Australian barley and beef. At a time where Australia is already suffering the economic impact of lockdowns ( losing US$2.6 billion a week), this is the last surprise the nation needs right now. Australia’s barley shipments to China are worth about US$1 billion a year and the beef ban will affect about one-third of the country’s exports to China, with an annual value of US$800 million.

You’ve got hundreds of thousands of people who’ve died, millions who’ve lost their jobs and billions who’ve had their lives disrupted, the least the world can expect is that there be an investigation and Australia’s far from a lone voice in advancing that,

– Birmingham said.

Meanwhile, this by no means that Australia will submit to China's trade threats and loosen its squeeze over China's handling of the COVID-19, for both Australia and the US are making serious allegations. 

I was very clear that in no way would Australia change our public health policies or our national security policies or any of our policy positions under threat of economic coercion and that remains very much the case,

– Birmingham stressed. 

When you couple the above with the increasingly harsh rhetoric from Washington and Beijing, the tensions couldn't come at a worse possible time for markets. At the start of this week, White House trade adviser Peter Navarro said China should pay for its role in spreading the coronavirus. “A bill has to come due for China,” Navarro told CNBC. “They inflicted tremendous damage on the world which is still ongoing,” Navarro said, and even suggested that the US could impose new tariffs or to walk away altogether from the phase one deal that had put a milestone down within a bitter 18-month battle between the world's two largest economies and roiled markets.

Since the start of the FX week, AUD/USD has fallen from a high of 0.6561 to a low of 0.6432. The flow has not been all way one mind you. The US dollar has been mixed and there have been some Australian data that were not bad as expected. However, the path of least resistance, fundamentally, is weighted to the downside at this juncture. 

"It's a trade war remix tape coupled with the uncertainty over the economic outlook and the shape of things to come," analysts at Westpac said. "The resulting stress leaves AUD vulnerable to a setback, especially as it has closely tracked MSCI China."

ALL FOMC members against negative rates

Meanwhile, Fed's Powell's comments fuelled a spike in the US dollar on Wednesday, further adding to the bearish case for AUD/USD. Powell noted that the FOMC's view on negative rates has not changed and reiterated that it's not something the Fed is looking at.

"The Fed intends to continue using tools it has already tried," Powell said in answer to questions at an event organized by the Peterson Institue for International Economics.

Previous minutes on negative rates debate says all FOMC participants were against them.

AUD/USD levels

 

Overview
Today last price 0.6448
Today Daily Change -0.0023
Today Daily Change % -0.36
Today daily open 0.6471
 
Trends
Daily SMA20 0.6419
Daily SMA50 0.6282
Daily SMA100 0.6532
Daily SMA200 0.6672
 
Levels
Previous Daily High 0.6536
Previous Daily Low 0.6432
Previous Weekly High 0.6549
Previous Weekly Low 0.6372
Previous Monthly High 0.657
Previous Monthly Low 0.598
Daily Fibonacci 38.2% 0.6472
Daily Fibonacci 61.8% 0.6497
Daily Pivot Point S1 0.6423
Daily Pivot Point S2 0.6375
Daily Pivot Point S3 0.6319
Daily Pivot Point R1 0.6527
Daily Pivot Point R2 0.6584
Daily Pivot Point R3 0.6632

 

 

 

 

 

 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Forex News


Latest Forex News

Editors’ Picks

AUD/USD jumps back above 0.6950 as S&P 500 futures test 3,200

Following a bearish opening gap, AUD/USD has recovered ground and trades above 0.6950, tracking the bounce in the S&P 500 futures. The bulls shrug off US-China tensions and the worsening coronavirus situation in the US and Australia. 

AUD/USD News

USD/JPY bears holding their positions below 107 level

Yen remains a safe haven currency of choice as trade wars and the coronavirus play havoc risk apatite. Investors pin hopes on Gilead Sciences reporting that its antiviral drug Remdesivir recorded positive results in clinical trials.

USD/JPY News

Gold: Pierces $1,800 inside short-term bullish flag

Gold prices extend recoveries from $1,798.14, defies two-day losing streak. A seven-day-old bullish technical pattern, sustained trading beyond immediate support favor the buyers. 200-HMA offers additional downside support, bulls will cheer break of $1,811.60.

Gold News

WTI: Depressed above $40 amid output cut talks

WTI defies the late-Friday recovery moves while slipping from $40.80. Saudi Arabia pushes for two million barrels a day output cut, IEA improves on oil demand forecast. Risk-tone remains mildly positive amid virus woes, US-China tension.

Oil News

S&P 500: Bank's earnings in focus, COVID-19 induced insolvency fears simmer away

The S&P 500 will be a key theme on Q2 earnings this week, traders watching the banks for guidance. Wall Street stocks remain in bullish territory, but the S&P 500 is on thin-ice while below the June highs. 

Read more

Forex MAJORS

Cryptocurrencies

Signatures