- AUD/USD refreshes weekly bottom following mixed comments from RBA Governor Lowe.
- RBA’s Lowe expects it will take until 2024 for inflation to be sustainably within the 2-3% range.
- US dollar strength, risk-off mood favor bears, covid woes are the key.
- US Jobless Claims, qualitative catalysts should be watched for fresh direction.
AUD/USD remains on the back foot for the third consecutive day, down 0.38% intraday around 0.7455, as RBA Governor Philip Lowe exerts additional downside pressure on the quote during early Thursday. In doing so, the pair refreshes weekly low, on the way to yearly trough, as the covid woes also heavy the pair.
While striking a cautious note, RBA’s Lowe said, “Watching Sydney lockdown carefully, but expect the economy to rebound quickly once over.” The policymaker also cited sluggish wage price growth to please the AUD/USD bears.
Read: RBA’s Lowe: Step-down in bond buying does not represent a withdrawal of support
Downbeat market sentiment, mainly due to the coronavirus (COVID-19) woes, adds to the AUD/USD weakness due to its risk-barometer status. Among the key headlines are the all-time infections in New South Wales and South Korea’s jump in daily cases, not to forget Thailand’s daily record of covid-led deaths to 75.
While citing covid fears, Atlanta Federal Reserve President Raphael Bostic said, per Reuters, “A new rise in coronavirus infections driven by the more virulent Delta variant could cause consumers to "pull back" and slow the US recovery.” Additionally, Australia’s Health Expert Catherine Bennett, per ABC News, says many more Australians need to be vaccinated before states and territories can even consider doing away with lockdowns to control outbreaks while World Health Organization (WHO) official Mike Ryan warned, per The Guardian, of ‘epidemiological stupidity’ of early covid reopening.
It’s worth noting, unfortunately, that figures compiled by Johns Hopkins University suggest the virus-led daily death figures fell over the last month to around 8,000 around the world. Even so, the total death toll passes four million.
Other than the virus woes, the indecision over the future moves of the key global central banks, including the US Federal Reserve (Fed) and European Central Bank (ECB) also weigh on the market’s sentiment. The latest FOMC minutes added to the confusion over the Fed’s rate hike as some policymakers consider the standard of “substantial further progress” needed to adjust monetary policy was seen as not having yet been met. Alternatively, others anticipate conditions to reduce the pace of asset purchases to be met earlier than previously expected. In the case of the ECB, the regional bank is up for a special meeting for the first time in 20 years to solve the inflation riddle.
Amid these plays, gold snaps a six-day uptrend and S&P 500 Futures step back from the record top. Further, the US 10-year Treasury yield licks its wounds near late February lows.
Having witnessed the initial reaction to the key Aussie event, the AUD/USD pair traders will keep their eyes on the risk catalysts, mainly the covid headlines and ECB updates for fresh impulse. Also important will be the weekly US Jobless Claims amid recently upbeat US JOLTS Job Openings. Should US fundamentals strengthen, coupled with the ECB’s rejection for tapering and the virus-led risk-off mood, the quote is ready to refresh the yearly low.
Technical analysis
AUD/USD bears cheer sustained trading below a three-week-old resistance line and 200-DMA, respectively around 0.7500 and 0.7580 on the way to the yearly bottom near 0.7445, marked last week. However, any further weakness will be questioned by August 2020 top close to 0.7415 and the 0.7400 threshold.