AUD/USD flirts with lows near 0.7350 amid US-China talks, covid woes

AUD/USD is breaking its consolidative mode to the downside in the Asian session, losing the midpoint of the 0.7300 level, as the risk-off mood intensifies amid tensions surrounding the US-China talks and looming covid worries in Australia.

The market mood is worsening, with S&P 500 futures extending losses below 4,400, as US-Sino trade talks get underway. China's Vice Foreign Minister Xie Feng said that the standstill in US-Sino relations was due to some people in America treating Beijing as an "imaginary enemy”.

Further, Australia sees no relief from the Delta covid variant flareups while Goldman Sachs predicts that the Sydney covid lockdown is likely to persist until September., as the US bank revises down its Australian Q3 GDP forecast.

Meanwhile, a broadly subdued US dollar and retreating Treasury yields offer no support to the aussie bulls, as a test of the 0.7300 level appears inevitable going forward. Later in the day, the US New Homes Sales data will provide some fresh trading impetus.

Investors could keep an eye on the US-China trade talks and the covid developments ahead of Wednesday’s FOMC decision, where the Fed is likely to throw some hawkish hints on tapering, possibly in the final quarter of this year.

AUD/USD: Technical levels

“In the 4-hour chart, the pair is pressuring a mildly bullish 20 SMA, while the longer moving averages head firmly lower above the current level. Technical indicators retreat, with the Momentum nearing its 100 level and the RSI already within negative levels. Support levels: 0.7330 0.7290 0.7260. Resistance levels: 0.7400 0.7440 0.7475,” FXStreet’s Chief Analyst, Valeria Bednarik notes.

AUD/USD: Additional levels