The reason why this matters for the Aussie Dollar is that China is
Australias largest trading partner. That means that disruptions between
the two nations could be economically consequential. If this translates
into a more uncertain outlook for the nation, that could make things
more difficult for the Reserve Bank of Australia (RBA) as it tries to
navigate the country past the coronavirus pandemic.
But that‘s not the only fundamental development that can drive
AUD/USD. The sentiment-linked currency can be quite sensitive to news
flow that shapes the landscape for global growth. As such, it tends to
move closely with benchmark stock indices, especially those based in the
United States. That is why it saw some weakness on recent jitters
stemming from Treasury Secretary Janet Yellen’s comment on monetary
policy.
S&P 500 futures are pointing lower following the announcement from
the NDRC, contributing to weakness in the Aussie Dollar. If sentiment
continues to sour into the remaining 24 hours, then AUD/USD could be
vulnerable, especially if there are retorts from Australian government
officials. Then on Friday, keep a close eye on the US non-farm payrolls
report. A better-than-expected report could push up bond yields, opening
the door to AUD/USD weakness. But, still-dovish Fed commentary has been
keeping bond markets cool.
AUD/USD may be at risk in the near term looking at the 4-hour chart
below. The 20-period Simple Moving Average (SMA) crossed under the 50
equivalent. This formed a bearish ‘Death Cross’, hinting at the
possibility of weakness. Still, prices have the 0.7702 – 0.7687 support
zone to contend with. Clearing this area could open the door to
revisiting early April lows. Getting there entails taking out the 23.6%
Fibonacci retracement at 0.7641.
