During Tuesday's early European trading hours, the AUD/USD currency pair erased its early-day losses and took offers near the 0.7114 level, mainly due to the risk-off market sentiment backed by the escalation of diplomatic tensions between the U.S. and China. The virus worries also undermined the perceived riskier Australian dollar and contributed to the currency pair gains. Besides, broad-based U.S. dollar strength backed by the hopes of the U.S. fiscal stimulus package also contributed to the currency pair's losses. At the moment, the AUD/USD currency pair is currently trading at 0.7139 and consolidating in the range between 0.7114 - 0.7177.
Due to the long-lasting US-China tussle and growing market worries about the ever-increasing number of coronavirus cases, the S&P 500 futures have shaved-off gains and turned negative near daily lows of 3,230 which eventually undermined the perceived riskier Australian dollar and exerted some downside pressure on the currency pair. If talking about US-China on-going war, the relationship between the world's two largest economies (US-China) got even worse, as China ordered the U.S. to close its office in Chengdu in return of the U.S. earlier move to close china's office in Houston.
Apart from the Sino-American tussle, the expectations that the much-awaited another U.S. fiscal package will be shortly released initially favored the risk-on market sentiment. The U.S. Senate Republicans introduced a $1 trillion COVID-19 aid package that would include $1,200 payments to U.S. citizens, as well as incentives for the manufacturers of personal protective equipment in the United States, rather than China. It is also worth mentioning that this package would include $190 billion in loans for small businesses and $100 billion in loans to businesses that operate seasonally or in low-income areas. These hopes became the key factor that capped further losses in the equity market and provided some support to the pair.
However, the reason behind the fresh downticks in the equity market could also be associated with the fears that the U.S.'s economic recovery could undermine amid the resurgence in coronavirus. The surge in coronavirus cases continued on its pace, especially in the United States. As in result, the investors were worried that the intensifying virus cases could undermine the economic recovery, which eventually fueled the expectation of more stimulus by the Fed.
The number of coronavirus infections has crossed almost 16.30 million across the world, whereas more than 650,000 people have died globally, as per the Johns Hopkins University. Whereas, the California coronavirus cases increased by at least 10,549 on Monday to 463,439 total, which now crossed the record of Massachusetts in total COVID-19 deaths. Australia's no. 2 populous states of Victoria also reported 384 new cases on the day vs. 532 previous day's surge. In contrast, New Zealand has reported zero cases of Covid-19 for the 3rd-day in a row.
As in result, the broad-based U.S. dollar erased its early-day deeper losses and edged higher, at least for now. However, the gains in the U.S. dollar could be short-lived or temporary due to the worries that the economic recovery in the U.S. could be stopped in the wake of the resurgence in coronavirus cases. However, the gains in the U.S. dollar kept the currency pair under pressure. Whereas, the U.S. Dollar Index that tracks the greenback against a basket of other currencies recovered 0.04% to 93.773. Therefore, the bullish bias in AUD/USD has faded a bit.
Daily Support and Resistance
Pivot Point 0.7139
The AUD/USD is trading at 0.7176 level after entering the overbought territory, climbing distinctly to trade at the 0.7147 mark. Closing of a Doji candle implies the chances of a selling bias in the Aussie. On the lower front, the AUD/USD pair could sink to the 0.7120 mark, while resistance resides at 0.7150. Let's look for staying bearish below 0.7180 and buying over 0.7064. Good luck!