- A combination of factors continues to put some pressure around AUD / USD on Monday.
- RBA’s pessimistic expectations and escalating trade tensions with China weigh on the AUD.
- Political uncertainty in the United States could help limit deeper losses for the pair, at least for now.
The pair AUD/USD remains under pressure at the start of the European session on Monday, falling below the 0.7000 level at fresh three-month lows. At time of writing, the pair is rallying again towards 0.7010 after having set a low during the Asian session at 0.6990.
Despite China’s upbeat manufacturing PMI, the Aussie has struggled to gain significant traction and has seen pressured by growing tensions with its key business partner. It’s worth reporting that China banned Australian timber imports from Queensland over the weekend.
Furthermore, the news indicates that Chinese importers are preparing for another round of restrictions on Australian trade items, including bans on copper ore, copper concentrate and sugar, which are expected to be introduced this week. This has further strengthened the case for further easing by the RBA.
The Reserve Bank of Australia is scheduled to announce its latest monetary policy update during the Asian session on Tuesday. The market seems to have fully discounted a cut in the benchmark interest rate and therefore the key focus of attention will be on the language of the accompanying monetary policy statement.
On the other hand, the US dollar has remained underpinned by growing concerns about the economic consequences of the new coronavirus-induced lockdowns in western countries. However, political uncertainty in the US has prevented the USD bulls from opening new positions aggressively and has helped limit the deeper decline in the AUD / USD pair, at least for now.
Therefore, it will be wise to wait for some solid continuation selling before investors start to position themselves for any further bearish moves. Having said that, the bias seems to lean firmly in favor of the bears and it seems more likely that the AUD / USD pair will extend the decline in the short term.
Market participants are now awaiting the release of the US ISM Manufacturing PMI for further momentum. This, together with the events related to the coronavirus saga, will influence the dynamics of USD prices and could generate some short-term trading opportunities at the start of the American session.
Credits: Forex Street
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
