- AUD / USD has retraced from the highs of the previous session to consolidate around 0.7800.
- Deteriorating risk appetite was the main driver of the decline.
- Australian retail sales and trade data will be released overnight and will be watched by AUD traders.
The AUD/USD has come under pressure on Wednesday amid a broad deterioration in the market’s broad appetite for risk. The pair was trading in a 0.7820-40 range during the Asia Pacific / early Europe sessions, but has since fallen back to trade on both sides of the 0.7800 level. Currently, the pair is trading 0.3% or around 25 pips lower on the day.
Note that AUD / USD found decent support at its 21-day moving average (DMA), which is currently just north of the 0.7770 level, which coincided with the support offered by an uptrend linking the end of February and March 2. lows at 0.7692 and 0.7736 respectively. Technically speaking, AUD / USD now appears to be forming an ascending triangle, with weekly highs at 0.7835 forming the top.
If the bears regain control between now and the end of the week and the AUD / USD breaks below its 21 DMA and the recent uptrend, a test of the 50 DMA at 0.7724 as well as the low of the week Just below the 0.7700 level, it could be up for grabs. Alternatively, a break to the upside of this week’s highs could open the door for a run at the 0.7900 level, without many key areas of resistance in the interim.
Performance of the day
Everything shifted back to bond market price action on Wednesday, and US government bond yields rose sharply (at the time of writing, US 10-year yields). they were up a little over 5 basis points on the day and were nearly over 1.50% at one point). This appears to have caused some nerves as investors fear a repeat of the volatility seen at the end of last week. As a result, the US equity markets are down and risk-sensitive exchange rates (including the AUD and NZD) are among the underperforming exchange rates in the G10 on Wednesday.
Looking ahead, attention will return to Australian national affairs during Thursday’s Asia Pacific session with the release of the January trade report at 00:30 GMT. The trade balance for the month is expected to have a surplus of A $ 6.5 billion. Westpac notes that the Australian economy has run a trade surplus for 36 consecutive months now or every month since early 2018. Therefore, the first month of 2021 is expected to continue this trend. ANZ believes there is a risk that the service surplus will decrease a bit, as some international students finished their degrees and probably returned home. At the same time as the trade data, the final estimate for Australian retail sales for January will also be released; Markets expect the data to be unchanged from ABS’s preliminary estimate of + 0.6% MoM.
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