AUD/USD seesaws around 0.6600 as coronavirus fears persist
- AUD/USD fails to hold onto the latest losses, recovers modestly.
- Market players continue their rush to risk-safety and seek solace in the US dollar amid upbeat US data.
- No major data/events from Australia/China keep traders searching for more coronavirus headlines for fresh impulse.
AUD/USD remains nearly unchanged while taking rounds to 0.6600 at the start of Tuesday’s Asian session. The Aussie pair gapped down at the week’s start on coronavirus (COVID-19) fears while weakened on the US dollar recovery afterward. Though, a lack of major updates from home seems to limit the pair’s immediate moves.
Coronavirus spreads outside China but is not a pandemic…
While the coronavirus outbreak in Italy and South Korea propelled risk-off at the beginning of Monday’s trading, the World Health Organization (WHO) tweeted that the COVID-19 peaked between the end of January and early February. Also increasing the ray of hope were declining emergency levels in many Chinese provinces as well as comments from the Federal Reserve Bank of Cleveland President Loretta Mester. The Fed Chief clearly mentioned that Monday’s market reaction is “one day” while also mentioning that her business contacts don’t say any downturn in demand due to the Chinese disease.
Even so, risk-off continues as Italian PM Conte said that he could see a virus having a strong impact on the Italian economy.
Also negatively affecting the market’s trade sentiment were the fears of worsening the US-China relations. While neither party anticipating any deviation from the phase-one terms due to the coronavirus, China’s issuance of force majeure certificates to more than 3,000 firms indicate other things. Additionally, Beijing's extradition of US journalists over the article that was cited as racist is likely to grab a bitter response from the Trump administration.
That said, the US equity benchmarks marked noticeable losses while the 30-year bond yields from the world’s largest economy refreshed record lows. The S&P 500 Futures is down 3.38% to 3,226 by the press time.
The US dollar recovery adds to the burden…
In addition to the risk-off moves, the USD recovery also weighed down the AUD/USD pair. While broadly positive fundamentals continued to push the market players towards the greenback in times of uncertainty, improvements in the Chicago Fed National Activity Index and the US Dallas Fed Manufacturing Index further strengthened the US dollar.
Looking forward, a lack of major data in Australia and China during this week could keep coronavirus headlines in the driver’s seat.
Technical Analysis
AUD/USD is likely to witness a pullback amid overbought RSI and repeated failures to dip further below 0.6600 key support. In doing so, 0.6620/22 could be on the buyers' radar, based on the Technical Confluence Indicator. However, the pair’s downside below 0.6600 might not refrain to challenge 0.6572 key support.