- AUD/USD holds lower ground near recently refreshed yearly low.
- Downbeat US data, Wall Street performance and covid woes fan risk-off mood.
- Powell repeats defensive play, RBA Minutes unveiled policymakers’ fears.
- Aussie Wage Price Index for Q2 2021, FOMC Minutes will be the key data/events, RBNZ should be observed as well.
AUD/USD remains pressured around 0.7250 as Asian traders begin Wednesday's task after bears cheered the heaviest fall in 11 weeks to refresh yearly low on risk-off mood. While the fears of the Delta covid variant becomes an obvious leader to weigh on the quote, disappointing US data and downbeat performance of US equities, as well as gold, favored the pair sellers the previous day.
Bears on the throne
Be it the RBA policymakers’ acceptance of the economic fears emanating from the covid variant or the Aussie virus conditions, not to forget New Zealand’s entry to the virus-infected club, everything portrays the COVID-19-led pessimism. Further, Fears of the US weekly cases to jump to 200,000, near January levels, joined the yearly peak of virus infections in Australia to magnify the pandemic woes. Given the AUD/USD pair’s risk-barometer status, bears cheered the coronavirus updates to refresh the yearly low.
In addition to the virus fears and RBA Minutes, downbeat US Retail Sales for July, -1.1% MoM versus -0.3% expected and +0.7% previous readouts, also portray the market’s pessimism, underpinning the US dollar’s safe-haven demand.
It’s worth noting that the Minneapolis Fed President Neel Kashkari’s repeat of tapering comments battle Fed Chairman Jerome Powell’s cautious optimism but the policy hawks remain hopeful, which in turn offer additional strength to the US Dollar Index (DXY).
The same weighs on the equities and gold prices, not to forget AUD/USD, while ignoring mildly offered US 10-year Treasury yields.
It should be noted that the geopolitical fears concerning the Taliban’s takeover of Kabul and cautious sentiment ahead of the Reserve Bank of New Zealand’s (RBNZ) widely anticipated rate hike, the first among the major central banks, also drag the AUD/USD prices.
Considering the short-term prevalence of the aforementioned catalysts, the Aussie pair is likely to stay depressed and refresh the yearly low. However, the Aussie Wage Price Index for the second quarter of 2021 (Q2 2021), expected +1.9% versus 1.5% YoY prior, will be the key to follow. Also important will be the minutes of the latest Fed meeting. The RBNZ moves and reaction to the latest virus case will be crucial too.
Read: FOMC Minutes July Preview: More new questions than answers
Technical analysis
Although a clear break of the previous low of 2021, around 0.7288, AUD/USD bears keep reins to refresh the annual bottom. However, September 2020 tops and a downward sloping trend line from April, respectively around 0.7240-45 and 0.7230, can trigger the Aussie pair’s corrective pullback.
