- A combination of factors triggered new selling around AUD / USD on Thursday.
- The nervousness of COVID-19, the softer Chinese GDP figures acted as a headwind for the Australian dollar.
- Risk aversion benefited the safe-haven dollar and contributed to intraday selling.
The pair AUD/USD it maintained its offered tone during the early American session and was last seen hovering near the lower end of its daily trading range, around the 0.7440-35 region.
The pair came under new selling pressure on Thursday, erasing the previous day’s modest gains amid concerns about the spread of the highly contagious Delta variant of the coronavirus. The Australian state of Victoria was ordered a five-day lockdown on Thursday following a spike in COVID-19 infections, which, in turn, was seen as a key factor that acted as a stumbling block for the AUD / USD pair. .
Apart from this, a slowdown in China’s economic growth was further affected and put some additional pressure on China’s aussie proxy. In fact, China’s annualized GDP growth for the second quarter of 2021 stood at 7.9%, compared to consensus estimates of 8.1% and 18.3% previously. The combination of factors took its toll on global risk sentiment and further pushed flows away from the Australian dollar perceived as riskier.
Meanwhile, risk aversion, as shown by a generally weaker tone in equity markets, underpinned the safe-haven US dollar. The support factor, to a greater extent, helped offset dovish testimony from Fed Chairman Jerome Powell on Wednesday, the ongoing decline in U.S. Treasury yields, and unimpressive numbers from macro data from the US
Data released by the US Department of Labor (DOL) revealed that there were 360,000 initial claims for unemployment benefits during the week ending July 10. This was lower than the prior week’s revised upward reading of 386,000. Separately, the New York Federal Reserve’s Empire State Manufacturing Index improved sharply to 43 in June from the previous 17.4, while the Philadelphia Fed Manufacturing Index fell more than expected to 21.9 from 30.7 in May.
The following will be the second day of Powell’s semiannual testimony before Congress. Powell is unlikely to deviate from his view that the recent surge in inflationary pressures was only temporary and would likely ease shortly. This should act as a headwind for the dollar and provide some support for the AUD / USD pair. That said, the nervousness of COVID-19 favors bearish traders and supports the prospects for further losses.
Technical levels
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