AUD/USD remains depressed below 0.6500 as risk aversion continues
- AUD/USD extends two-day losing streak, consolidates losses above 0.6450.
- Risk-tone remains heavy amid trade war, fears of the virus outbreak.
- Aussie Treasurer said to update the economic outlook in June before testing for coronavirus (COVID-19) infection.
- Australia’s Wage Price Index and RBNZ will be the key in Asia.
AUD/USD retraces two-day losses while taking rounds to 0.6470/75 amid the early Wednesday morning in Asia. The pair has been declining since the week’s start as the trade war with China joins hands with broad risk-off sentiment backed by fears of virus resurgence.
China fights the trade war…
On Tuesday, China banned meat imports from four Aussie processors but the Chinese Foreign Ministry, later on, said that customs found beef products from certain Australian firms violating the inspection requirements.
Even if the dragon nation tries to talk down the trade war, the early-week statements from the Global Times already cited such a move as coming and hence keep traders worried. The government-backed media relied on the Chinese experts while stating that tariffs on barley will not be the only problem Australia may face. The reason for the punishment could be traced from the Aussie PM Scott Morrison’s push for an inquiry into China’s role in the virus outbreak.
Not only with Australia but the US is also China’s rival in the trade war field. On Tuesday, US President Donald Trump turned down the scope of any renegotiation of the Phase 1 deal terms for China. Even so, the Chinese Finance Ministry released a second list of tariff waivers for some of the US goods the previous day. Additionally, the dragon nation is also said to increase soybean import forecasts for the current year while stating it as in lieu of implementing the Phase One trade deal with the US.
Fears of virus resurgence question economic restart…
With the virus cases nearly tripled in Germany and a fresh wave of rising case numbers in Wuhan, policymakers doubt their decision to ease lockdown restrictions. Also, an ex-member of the White House Coronavirus Task Force Team, Doctor Anthony Fauci warned the US policymakers over their decision to gradually restart while saying that this could cause needless suffering and set the economic recovery back.
It’s worth mentioning that the Aussie Treasurer Josh Frydernberg tested for coronavirus after coughing in the parliament during the speech. The diplomat said to present an economic forecast in June before abruptly closing the talks.
Other than the trade and virus catalysts, the Fedspeak also contributed to the market’s risk-off sentiment. While the Fed policymakers tried to talk down the negative rates, their fears of downbeat economic performance and horrible employment data weigh on the trading sentiment.
While these catalysts are likely to keep playing their roles, Australia’s Wage Price Index for the first quarter (Q1) of 2020, expected to soften to 2.1% from 2.2% YoY, could direct immediate moves of the pair. Although the data belongs to the pre-lockdown period, any disappointment can’t be taken lightly. Additionally, the RBNZ monetary policy and quarterly statement will also be looked at closely as the Pacific partner is in the same boat. Forecasts suggest no rate change but an increase in the Quantitative Easing (QE) to $60 billion from $30 billion with downbeat forward guidance on the rates.
Technical analysis
AUD/USD is inching closer to the three-week-old rising support line, at 0.6415 now, a break of which can drag it towards the monthly low near 0.6370. On the upside, buyers need a sustained break above 0.6515 to challenge April top near 0.6570.