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AUD/USD: Under pressure around 0.6500 amid broad US dollar strength

  • AUD/USD struggles to hold onto the latest bounce off 0.6460.
  • The US dollar registers heavy gains following expectations of substantial stimulus from the Trump administration.
  • Coronavirus continues to spread in Europe, China flashes green signals, the rest of the major global counterparts prepare to tackle the negative implications.
  • US President Trump’s press conference, speech by RBA’s Debelle and second-tier Aussie data will be the immediate catalysts.

Following its recent pullback moves from 0.6463, AUD/USD seesaws around 0.6500 at the start of Wednesday’s Asian session. The pair fails to portray the recent risk reset amid the broad recovery in the US dollar. However, fears of the coronavirus (COVID-19) remains on the table. Investors presently await US President Donald Trump’s announcement of tax reliefs for fresh impulse whereas RBA’s Debelle will occupy the news line afterward.

Is it a risk-on?

Despite worsening situations in Italy and a major part of Europe, not to forget the absence recovery on the US side, the market’s risk-tone recovered on Tuesday. The reason could be traced from the US signals to announce tax reliefs.

While portraying the same, the US 10-year treasury yields rose 30 basis points (bps) to 0.83% whereas Dow Jones Industrial Average Index regained its place beyond 25,000 after the Monday’s slump. Also, the US dollar index gained more than 150 pips by the end of Tuesday.

The ECB and the European leaders are up for emergency meetings whereas Japan and Australia have also shown readiness to announce further stimulus. Though nothing concrete has crossed wires so far and hence traders are all checking for the updates at the start of the day.

Looking forward, the Coronavirus Task Force Briefings by the US officials, including President Trump, as well as the RBA’s Deputy Governor Guy Debelle will be of immediate importance.

While the US policymakers have already shown readiness to announce tax reliefs in addition to other fiscal measures, RBA’s Debelle signaled the ability to cope-up with another rate cut in his latest appearance. Hence, anything more than the previous lines could offer a surprise move from the markets.

Other than these qualitative catalysts, the virus headlines and Australia’s Westpac Consumer Confidence and housing data could also offer near-term directions.

Technical Analysis

A descending trend line from February 05, currently at 0.6645, seems to limit the pair’s immediate upside past-21-day SMA level of 0.6615. Alternatively, 0.6460 and February month low near 0.6430 holds the keys to further declines.

 

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