AUD/USD struggles inside a choppy range below 0.7350 amid subdued markets
- AUD/USD stays subdued despite bouncing off intraday low.
- Market sentiment dwindles as vaccine optimism fails to overcome covid, tapering woes.
- DXY tracks US 10-year Treasury yields to portray a pullback.
- Light calendar, mixed concerns to challenge momentum traders during Asian session.
AUD/USD fades bounce off intraday lows, taking rounds near 0.7340, amid Friday’s Asian session. In doing so, the Aussie pair remains directionless after bears returned to the table the previous day.
Although the coronavirus woes and fears of the Fed’s tapering are the key catalysts behind the AUD/USD pair’s recent weakness, sluggish moves of the US dollar could be linked to the pair’s inactivity.
That said, the US Dollar Index (DXY) drops 0.03% to 93.00 by the press time. The greenback gauge seems to follow the US 10-year Treasury yields, down one basis point (bp) after refreshing the monthly high on Thursday.
The covid concerns remain as the major challenge for global market sentiment, not only for the AUD/USD traders. As per the latest data, infections in Queensland and Victoria stay closer to the recent highs whereas China reports 99 new cases versus 81 marked the previous day. Further, Thailand reports a daily record of 23,418 new covid cases whereas the US death toll remains near a five-month high.
Also weighing on the pair are the rising concerns over the Fed’s tapering after the latest US Producer Price Index (PPI) data for July renew reflation woes. Following this, Reuters’ poll said, “The Federal Reserve will announce a plan to taper its asset purchases in September.”
On the positive side, US President Joe Biden called on lawmakers to enact legislation aimed at lowering drug prices, including allowing Medicare to negotiate drug prices and imposing penalties on drugmakers that hike prices faster than inflation, per Reuters. Furthermore, Moderna’s study suggesting a six-month antibody versus the virus strains keeps traders hopeful.
Amid these plays, the stock futures remain mildly offered whereas stocks in Asia–Pacific trade mixed, mostly lower.
Considering the sluggish momentum and a light calendar in Asia, AUD/USD may remain pressured towards 0.7300 but inactive. However, the US Michigan Consumer Sentiment Index for August, expected to remain unchanged near 81.2, will be important to watch afterward, not to ignore the risk catalysts.
Technical analysis
AUD/USD remains vulnerable to refresh yearly low, currently around 0.7288, amid Failures to stay beyond a three-week-old ascending support line near 0.7365, not to forget the 0.7410-15 horizontal area established since early July.