- AUD / USD extends Friday’s losses amid bearish worries.
- US President Donald Trump, Global Times “Hu Xijin intensifies the war of words.
- Atlanta Fed GDP estimates Q2 2020 GDP at -42.8%, down from -34.5 a week earlier.
- Powell’s speech, US / China updates can entertain traders on a light calendar day.
AUD / USD remains under pressure near 0.6420 at the start of Monday’s Asian session. The pair extend Friday’s losses amid the new war of words between the United States and China. Strong risk aversion amid fears of the coronavirus (COVID-19) and a new weakness in the world’s largest economy, the United States, could also contribute to the pair’s weakness.
Read also: What you need to know before the markets open: Risk-off, GBP heavy funda, cold wars, Powell on TV
The American-Chinese struggle is intensifying…
According to initial arguments about the coronavirus epidemic, the fight between the United States and China has recently reached to suggest preparing for war. US President Donald Trump has said that the United States is developing a “super-duper missile” to overtake its military rivals, including Russia and China. On the other hand, the editor of the Chinese Global Times, Hu Xijin, tweeted to call on China to increase the number of nuclear warheads and strengthen nuclear deterrence.
It should also be noted that US President Donald also reiterated his allegations about the dragon nation while saying that the destruction of the virus could have been stopped by China.
Powell of the Fed tries not to spread pessimism…
Federal Reserve Chairman Jerome Powell recently noted that the US economy will recover “steadily” in the second half of 2020. However, policymakers have taken a cautious tone saying: “It will take some time “to recover all the lost GDP. You may have to wait with confidence for a vaccine to arrive. “
On the data side, retail sales in the United States posted frightening figures of -16.4% drop in MoM while the Atlanta Fed’s GDPNow model currently forecasts a drop in US GDP of 42.8 % in Q2 2020 against -34.5% the previous week. In addition, the latest Federal Reserve report on financial stability also warned of a “significant” impact on asset prices if the pandemic were to develop.
In the midst of all this, the feeling of tone of risk remains moderate, because the gradual reopening of certain economies keeps traders’ hopes despite the large movements of risk. That said, yields on 10-year US Treasuries, a measure of risk, gained 2.5 basis points (bp) at 0.644% at the end of Friday.
It should be mentioned that the Aussie-China tension and fears of the second wave of the virus epidemic are also putting downward pressure on the pair.
In the future, traders will keep their eyes on the television interview with Fed President Jerome Powell, which will be released Sunday at 11:00 p.m. GMT on Monday morning in Asia. In addition, any surprise comments from the United States or China, associated with viral updates, will have an impact on the markets.
A sustained break from the monthly support line moves the Australian pair closer to the May 07 low of 0.6378. However, the 50-day EMA, currently around 0.6400, limits the immediate decline in the pair. Meanwhile, the 100-day EMA around 0.6480 / 85 restricts the immediate rise in the pair.