AUD/USD reverses Thursday’s pullback moves as risk-off spreads in Asia

AUD/USD declines to 0.6564, after testing the intraday low of 0.6556, during the early-day trading session on Friday. In doing so, the Aussie pair fails to keep the previous day’s recovery moves from the 11-year low. The reason could be traced from the risk aversion in Asian as well as a mild pullback of the US Dollar Index from a three-week low marked on Thursday.

Be it global rating agencies like Moody’s and Fitch or the latest coronavirus (COVID19) updates from South Korea, everything keeps the risk-tone heavy. That said, the US 10-year treasury yields remain on the back foot around 1.265% following its bounce off the record low of 1.244% the previous day.

The South China Morning Post (SCMP) story cited the fresh risk of global supply disruptions and propelled the risk-off during early Asia. The moves were then carried forward by the coronavirus updates suggesting many first-ones in the list and the US administration’s efforts after joining the league yesterday.

Following that, China and South Korea released their coronavirus numbers and Fitch came out with the expectations that severe COVID-19 scenarios would pressure APAC ratings.

Among the latest catalysts, the People’s Bank of China (PBOC) said it will start conducting 5-billion-yuan worth of central bank bills swap (CBS) this Friday. Also, in the line is the South Korean Finance Minister’s readiness to increase spending past-2015.

It’s worth mentioning that CME’s indicator of probabilities suggesting the US Federal Reserve’s rate cut in March month meeting rose to nearly confirm levels during the early day readings after the comments from the Moody’s.

While portraying the trading sentiment in Asia, Japan’s NIKKEI drops 3.23% to 21,240 by the press time whereas stocks in China and Hong Kong are close to 2.0% down.

Looking forward, investors will keep eyes on the coronavirus updates as well as Fedspeak for near-term direction while the US data could entertain the traders afterward.

Technical Analysis

Sellers will be on the lookout for entry below 0.6540 while aiming 0.6500 round figure and a downward sloping trend line connecting lows marked on January 07 and 31, at 0.6495.