- AUD/USD holds lower ground, following the heaviest daily losses in eight days.
- Covid conditions worsen in Australia, lockdowns for 80% population is practice.
- DXY stays positive amid strong data, mixed Fedspeak and safe-haven demand, equities dwindle, gold dropped.
- China official PMIs for June, US ADP Employment Change and risk catalysts are the key.
AUD/USD bears take a breather, after being the biggest G10 loser, around 0.7515-10 during early Asian morning on Wednesday. The coronavirus (COVID-19) conditions in Australia can be held responsible for the Aussie pair’s latest slump. Even so, traders defend the 0.7500 round figures of late ahead of June’s activity numbers from Australia’s biggest customer China.
With activity restrictions after over 80% of the population in place, the Australian government is actively searching for clues of more covid contacts of the identified infections. “Queensland awaits more close contact results as exposure sites grow to include major shopping centres,” said ABC news. On the other hand, The Guardian notes, “Frustration is mounting in Australia over low vaccination rates and changing advice on the AstraZeneca jab after outbreaks of the highly contagious Delta variant sent more parts of the country into lockdown.”
Reuters come out with the details of the lockdown saying, “Northern Queensland state imposed a three-day lockdown in capital Brisbane and neighboring regions from Tuesday evening. The Western Australian capital of Perth began a four-day lockdown from Tuesday, joining Sydney and Darwin.”
It’s worth noting that Australia registered 100+ cases in recent days, sending an alarm to the policymakers with only a 4% fully vaccinated population.
Other than the covid headlines that weighed on the AUD/USD prices, the market’s mixed sentiment and the US dollar’s broad gains could also be spotted as the catalysts for the pair’s recent slump. The virus woes and strong US Consumer Confidence for June, coupled with the market’s rush for risk safety ahead of Friday’s US NFP are likely favoring the greenback.
That being said, the US dollar index (DXY) rose to the weekly high whereas gold prices dropped to the fresh low since mid-April. Further, Wall Street benchmarked closed mixed after refreshing the record top while the US 10-year Treasury yields remained lackluster around 1.47% by the end of Tuesday’s North American session.
Looking forward, AUD/USD traders will keep their eyes on China’s NBS Manufacturing and Non-Manufacturing PMI for June, expected 50.8 and 52.7 versus 51.0 and 55.2 respective priors. With the recent weakening of China data, any further downside could weigh on the pair. Following that, the US ADP Employment Change for June, the early signal for Friday’s Nonfarm Payrolls (NFP), expected 600K versus 978K, will be important to watch. Above all, risk catalysts comprising the covid headlines and Fedspeak, are crucial for fresh impulse.
AUD/USD drops back below the 200-day SMA level of 0.7565, suggesting further downside targeting the yearly low of 0.7477 amid bearish MACD. The 0.7600 threshold and early June lows near 0.7645 add to the upside filters.
