AUD/USD: Stays below 21-day SMA amid coronavirus fears

AUD/USD begins the week with an uptick to 0.6723, currently around 0.6720, at the start of Monday’s Asian session. Even so, the quote remains below the 21-day SMA level that has been exerting downside pressure on the pair since January 07. While China’s announcement of fiscal measures during the weekend might have helped the pair to kick-start the week on the positive side, the broad fears of coronavirus continue to weigh on the risk sentiment.

No respite from coronavirus…

Despite China’s aggressive efforts to tame the epidemic, markets and even global institutions like the International Monetary Fund (IMF) are worried about the coronavirus outbreak and its economic impacts on the macros.

The latest change in methodology triggered the risk-off during the last week by boosting the figures. As per the Chinese National Health Commission, there were 2,009 new confirmed cases of the coronavirus and 142 additional deaths as of February 15, totaling 68,500 infections and 1,665 deaths toll.

To counter the same, the dragon nation ignored their Lunar New Year celebrations and pumped multi-billion Chinese yuan into the markets via open market operations. More recently, the government identified the importance of fiscal measures, also emphasized by the IMF, while announcing corporate tax cuts and an increase in fiscal spending during the weekend.

However, markets keep fearing the contagion that is hurting Australia’s largest customer. As a result, the US 10-year treasury yields and the German bunds were on the back foot around 1.59% and -40.4 basis points (bps) respectively by the end last week.

All eyes on Aussie employment data…

While the US employment and consumer-centric numbers kept the US dollar on the front foot against the majority of its counterparts off-late, markets will be closely observing Thursday’s Aussie employment numbers to confirms the RBA’s latest upbeat rhetoric. Also important will be Wednesday’s fourth quarter (Q4) Wage Price Index from Australia. It should also be noted that the US has a bank holiday on Monday due to President’s Day.

Technical Analysis

Unless breaking 21-day SMA level, currently around 0.6752, prices are less likely to take aim at the monthly high near 0.6775. As a result, sellers holding short positions with the target of 0.6660 and 0.6600 shouldn’t be disappointed after the latest uptick.