AUD/USD reversal from 0.6800 extends to 0.6720 as market sentiment sours

The Aussie is set to cap a four-day uptrend on Thursday, as the pair turned lower from one-week highs at 0.6800 and has extended losses to test week lows at 0.6720 in the early European session.

Concerns about COVID-19 in China dampen risk appetite

The sharp increase of coronavirus infections in China has curbed hopes about the economic recovery of the Asian dragon, crushing the moderate optimism observed in the first half of the week.

The major Asian markets have closed Thursday’s session in the red, and European indexes are following suit posting losses between 0.17% in Frankfort and a 0.62% decline in London.

COVID-19 cases have surged in China since the Government relaxed its Zero-COVID policy, and are overwhelming the country’s healthcare system in a wave that is threatening to extend from urban to rural areas as many citizens will travel to celebrate the lunar year. with their families.

In this context, many countries are considering introducing a covid test for travelers from China. The US has already announced the mandatory tests from January 5 and Italy is considering the same measure after half of the travelers arriving on a flight from China tested positive for Coronavirus at Milan’s Malpensa Airport on Wednesday.

The sentiment-linked Aussie has been hit by the souring mood and investors’ concerns about the consequences for China’s Economic growth. In a thinned post-Christmas market, however, the pair remains within recent ranges on Thursday with the focus on the US initial jobless claims and oil stocks figures, due later today.

Technical levels to watch