- AUD/USD stays pressured around weekly low despite defending 0.7350.
- Covid woes remain elevated but USD steps back on 30-year bond auction.
- US President Biden pushes for vaccination in his six-pronged strategy, ECB fails to entertain markets with “recalibration”.
- Risk catalysts keep the driver’s seat amid a light calendar.
AUD/USD bears take a breather around weekly low, recently sideways near 0.7370 during the early Friday morning in Asia. The risk barometer pair closed Thursday at par with the opening levels despite marking a 50-pip move on contrasting catalysts and risk-off mood.
Although the US dollar Index (DXY) snapped a three-day uptrend tracking the Treasury yields, the virus-led fears stopped AUD/USD from recovery the previous day. That said, the DXY dropped 0.20% daily after the US 10-year Treasury yields fell 4.3 basis points to revisit the sub-1.30% area, around 1.297% by the end of the North American session. The dismal 30-year note auction could be linked to the Treasury yields moves.
On the other hand, the virus woes escalate after Australia’s second consecutive day of increase in cases joining grim numbers from the US, the UK and India. US President Joe Biden recently confirmed the worrisome conditions while saying, “We are in a tough stretch on covid and it could last for a while.”
Apart from the battle of the covid fears and USD weakness, the European Central Bank (ECB) moves also disappointed the markets and confused AUD/USD traders. The ECB left its rates unchanged, with the main refinancing rate 0.00%, as widely expected, while lowering the pace of the Pandemic Emergency Purchase Program (PEPP), at €1,850 billion until at least March 2022, terming it as “recalibration” rather than “tapering”. It’s worth noting that the ECB President Christine Lagarde sounded cautiously optimistic but failed to entertain the markets.
Elsewhere, the reduction in the US Jobless Claims and a 13-year high China factory-gate inflation data also kept AUD/USD traders hopeful even as Wall Street closed in the red.
Looking forward, a lack of major data/events at home will restrict the pair moves and help the latest consolidation. However, fears of the virus, updates on stimulus and political chatters can probe the optimists.
Technical analysis
A Doji candlestick on Thursday’s daily chart, just above the 50-DMA level of 0.7360, hints at a corrective pullback towards the 0.7400 threshold. However, AUD/USD bulls remain cautious unless crossing a four-month-old resistance line near 0.7455.
