AUD/USD: Recovery fades amid coronavirus, broad US dollar strength
- AUD/USD loses the majority of its recent gains towards 0.6700.
- Mixed responses to factory reopen dimmed early-week CPI from China, greenback strength exert additional downside pressure.
- China stays ready to respect phase-one deal terms.
- Second-tier Aussie data can entertain ahead of Fed Chair Powell’s testimony.
AUD/USD failed to hold onto recovery gains beyond 0.6708 despite snapping two-day winning streak on Monday. The Aussie pair currently takes rounds to 0.6685 at the start of Tuesday’s Asian session.
While China’s upbeat CPI offered a boost to the Aussie at the week’s start, mixed reaction to the reopening of factories and broad US dollar strength checked buyers afterward.
China fails to please buyers…
Be it stronger CPI since October 2011 or repeated calls by the key diplomats, including President Xi Jinping, China seems to lose its charm in pleasing the buyers. The reason could well be traced from the deadly coronavirus that has so far claimed more than 900 lives and crossed the 2002/03 epidemic SARS. On Monday, some of the big factories, like Ford and Tesla, resumed production in China but others stayed away with growing expectations of a longer period of no-work.
The latest news from Global Times suggests that the dragon nation stays ready to respect phase-one deal terms despite the epidemic. However, the same fails to generate any new bids.
With this, the market’s risk-tone stays under pressure with the US 10-year treasury yields taking rounds to 1.563%, -0.014, whereas Wall Street registered mild gains at the end of their trading session on Monday.
King dollar rules…
Amid broad uncertainty and pessimism elsewhere, traders maintained their rush to the greenback. The reason could be the recent slew of upbeat economics as well as positive assessments from the Fed, despite citing coronavirus fears.
Market players will now concentrate on the US Federal Reserve Chairman Jerome Powell’s testimony at 15:00 GMT. Even if the Fed Chair isn’t expected to rule out the negative impacts of coronavirus on the US economy and the global frontier, positive assessment of the world’s largest economy and Fed’s future path could please the USD bulls.
Ahead of that, Australian Home Loans, Investment Lending for Homes and National Australia Bank’s Business Conditions and Business Confidence will entertain the short-term traders. However, in no case headlines from China should be taken lightly.
Technical Analysis
A downward sloping trend line since January 16, at 0.6735, offers the immediate upside barrier followed by another resistance line ranging from January 01 at 0.6760. On the downside, 0.6660 and 0.6600 support levels remain on the bears’ radar.