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AUD/USD drops to fresh 2-week lows, farther below 0.6800 handle

  • Not so encouraging trade-related headlines continue to exert pressure on Friday.
  • The USD regains traction amid recovering US bond yields and added to the pressure.

The AUD/USD pair failed to capitalize on its intraday recovery and dropped to fresh two-week lows, around the 0.6775 region in the last hour.
After a modest intraday uptick to levels just above the 0.6800 handle, the pair met with some fresh supply and drifted back into the negative territory for the third consecutive session. The recent optimism over the resumption of the US-China trade talks already seems to have faded and was seen as one of the key factors weighing on the China-proxy Aussie.

Aussie weighed down by trade pessimism

The overnight contradicting comments by two White House advisers, followed by China’s warning to the US for its intervention in the Hong Kong issue raised doubts over any breakthrough from the upcoming talks between the world’s two largest economies in early-October and weighed on commodity-linked currencies - including the Australian Dollar.
The already weaker sentiment surrounding the major deteriorated further in the wake of reports, suggesting that the US President Donald Trump was not interested in making a "limited" trade deal with China. Hence, the key focus will be on the lower-level trade talks, which will lay the groundwork for high-level discussions in early-October.
Adding to this, a modest pickup in the US Dollar demand, supported by a goodish intraday rebound in the US Treasury bond yields, further collaborated to the pair's weaker tone through the early North-American session, with bulls failing to gain any respite from a positive turnaround in the global equity markets over the past hour or so.
It will now be interesting to see if the pair is able to attract any buying at lower levels or the ongoing slide marks the resumption of the prior/well-established bearish trend, setting the stage for a slide back towards challenging multi-year lows. Nevertheless, the pair remains on track to post weekly losses and snap two consecutive weeks of a positive move.

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