AUD/USD’s capped below 0.7050, pulls back to test 0.7000 support area

Australian dollar’s recovery attempt from 0.7010 lows witnessed on the early US session has lost steam right below 0.7050. The pair has pulled lower again, weighed by broad-based USD strength, to approach 0.7000 support area.

Australian dollar dives on USD strength

The aussie is trading lower for the second consecutive day on Thursday as the moderate risk appetite is been offset by the overall US dollar strength. The US Dollar Index appreciates 0.7% on the day to reach levels beyond 94.00 for the first time since late September.

Concerns about the global increase of COVID-19 infections, with Europe introducing new lockdowns, combined with the uncertainty about the outcome of US elections are keeping investors away from risk, and increasing demand for safe-havens like the greenback. 

Beyond that, the dovish stance of the Reserve Bank of Australia, which is expected to cut interest rates next week is adding negative pressure on the Aussie.

AUD/USD expected to break below 0.70 before US elections – Westpac

The FX strategy team at Westpac sees the aussie breaking below 0.70, under pressure ahead of the key events next week (RBA, US elections): “Overall, we see risks of a break of 0.7000/10 support pre-election but scope for a sharp rebound if equities recover.”