The AUD/USD extended its early-day gains and hit the intra-day high of 0.7069 marks mainly due to the broad-based U.S. dollar weakness. That was sponsored by the downbeat U.S. unemployment claims data, which fuel the fears that the U.S. economic recovery is failing. Apart from this, the market risk-on sentiment also undermined the safe-haven U.S. dollar and contributed to the currency pair gains. Across the pond, the gains in the S&P 500 futures, backed by the optimism over the coronavirus (COVID-19) vaccine/treatment, also lend further support to the currency pair.
Meanwhile, the hopes of the COVID-19 stimulus measures package also helped the marker trading sentiment gain further positive traction, undermining the perceived riskier Australian dollar and contributing to the currency pair gains. On the contrary, the downbeat Aussie trade data could be considered one of the key factors that kept the lid on any further gains in the currency pair. At this particular time, the AUD/USD currency pair is currently trading at 0.7060 and consolidating in the range between 0.7045 – 0.7069.
As per the latest report, Australia’s trade surplus shrank in August, released at 01:30 GMT showed. Details suggested that the Australian imports dropped by 7% month-on-month in August after July’s 7% rise. In the meantime, the exports also fell by 2% in August, having declined by 4% in July. The trade surplus decreased to AUD 4,294 million from AUD 4,607 million. However, the substantial fall in the inbound shipments suggested a weakening of national demand. Whereas, the consecutive monthly drop in outbound shipments indicates weak demand conditions in the global economy. This, in turn, becomes the key factor that limits the further upside in the currency pair.
Furthermore, the market risk tone was being supported by optimism over a possible vaccine and treatment for the highly infectious coronavirus. These positive vibes came after the report that Novavax Inc started a clinical late-stage trial of the coronavirus vaccine in the U.K. The experimental vaccine is produced on partnership terms with the government’s Vaccines Taskforce.
On the other hand, the reason for the upbeat trading sentiment could be associated with the talks concerning the U.S. coronavirus (COVID-19) stimulus package. Democrats in the U.S. House of Representatives recently spoke about their struggles over the $2.2 trillion COVID-19 stimulus package that could be voted on next week. Moreover, the hopes were further bolstered after the House of Representatives Speaker Nancy Pelosi and U.S. Treasury Secretary Steven Mnuchin hinted to resume delayed stimulus talks. This eventually exerted a positive impact on the market trading sentiment and extended support to the currency pair.
As in result, the broad-based U.S. dollar failed to gain any positive traction and edged lower on the day amid risk-off market sentiment. Moreover, the U.S. dollar losses could also be associated with the downbeat U.S. unemployment data, which fueled the fears that the U.S. economic recovery is failing. However, the losses in the U.S. dollar kept the AUD/USD currency pair higher.
At the U.S. data front, the number of U.S. claiming unemployment over the past week rose to 870,000, indicating a halt in the economic recovery and highlighting the pressing need for Congress to pass the support measures. This negative data failed to weigh the market trading sentiment. Besides, the market trading sentiment was rather unaffected by the reports suggesting the rise in COVID-19 cases globally.
The market traders will focus on FOMC Member Williams Speaks. Apart from this, the Durable Goods Orders m/m will also be key to watch. Meanwhile, the USD moves and coronavirus headlines will also closely follow to play a key role in the currency pair.
The AUD/USD signal hit stop loss as the pair failed to break above 38.2% Fibonacci retracement level of 0.7075. Unfortunately, the AUD/USD pair reversed below 0.7075 level and hit out stop loss. For now, the AUD/USD pair may trade bearish until the 0.7010 level, while a bearish crossover of 0.7010 may lead the AUD/USD price towards 0.6975. Let’s brace for the next setup before placing the next trade. Good luck!