AUD / USD consolidates losses below 0.7400 on mixed Australian trade figures, Covid nervousness

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  • AUD / USD bounces off an intraday low but remains lackluster.
  • Australia’s trade surplus is beating previous readings, forecast, but export and import details deteriorate for June.
  • Australia has the highest daily infections since August, Texas reports the largest one-day increase in the number of cases since February.
  • Fedspeak supports the weakening, the US NFP, of qualitative factors for a clear direction.

AUD / USD bounces off intraday low at 0.7386, up 0.08% on a day early Thursday. Despite this, the Aussie pair is struggling to reverse yesterday’s fall amid mixed concerns.

It should be noted that Australia’s recently bullish trade balance for June, 10496M vs. 10450M expected and 9681M previously, triggered the rally in trading. However, weaker exports and imports than before, respectively close to 4.0% and 1.0% against 6.0% and 3.0% in that order, challenge the bulls.

Read: June Australian trade balance: +10,496 million Australian dollars surplus over Reuters poll: +10,450 million Australian dollars

In addition to the mixed data, the AUD / USD pair also appears to be struggling as US Treasury yields remain firmer, as does the S&P 500 Futures. It should be noted that stocks in Asia Pacific lack a clear direction as the Australian ASX 200 falls 0.15% while the Japanese Nikkei 225 is up 0.30% at press time.

Behind the moves are traders’ indecision over the Fed’s next moves and coronavirus fears, not to mention stimulus hopes and geopolitical fears. After Fed Vice Chairman Richard Clarida reiterated his concerns about the 2021 cut, Treasury Secretary Yellen said, according to Bloomberg, “by the end of this year, inflation will reach a level consistent with the Fed’s target. Following this, San Francisco Federal Reserve Chairman Mary Daly also gave hints in favor of tightening monetary policy during the PBS Newshour interview. The Fed policymaker said, according to Reuters, his modal outlook is that the Fed may decline later this year or early next year.

In addition to signals relating to monetary policy adjustments, the woes of COVID-19 are also underpinning U.S. Treasury yields. That said, the latest updates suggest Texas marks the biggest one-day increase in covid cases since early February, while Japan reported record daily infections on Wednesday. Additionally, Australia is updating the highest daily infections since August 2020 while China’s recent virus numbers were also grim.

In addition, the West’s feuds against China and Iran appear to be escalating of late, bolstering demand for the safe haven of the US dollar.

Alternatively, the gossip that US policymakers are moving closer to further stimulus and that there are no major challenges seen so far for the global economic recovery seem to put a floor under some of the equity gauges. . It should be noted that the cautious sentiment on the approach of major non-farm wages in the US is also restraining market movements and confusing AUD / USD traders.

Looking ahead, risk catalysts remain the key to predicting short-term AUD / USD movements ahead of the key US jobs report, due for release on Friday.

Technical analysis

Unless breaching a one-month horizontal resistance around 0.7400–7410, also including a 21-day SMA, the chances of AUD / USD to return to an ascending support line from July 21, close 0.7345, cannot be excluded.


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