22nd September 2020 - AUD/USD: Bears battle key support line near two-week low beyond 0.7200


Good Morning,

Market Headlines

The death of US Supreme Court Justice Ruth Bader Ginsburg likely means that the passage of another stimulus package in Congress less likely before the US presidential election. Consequently, the Dow Jones Industrial Average lost 2% to end at 27,102.99 points ,while the S&P 500 fell 1.28% to 3,276.87. The Nasdaq Composite dropped 0.22%, to 10,769.20. Commodities, Brent crude oil futures fell 3.5% to $41.65, copper rose 2.9%, iron ore fell 4.1% to $119.55 (a six-week low), and gold rose 2.0%.

Currencies

AUD/USD: 0.7200 – 0.7320

EUR/USD: 1.1732 – 1.1867

GBP/USD: 1.2776 – 1.2964

USD/JPY: 104.00 – 104.90

USD/CAD: 1.3190 – 1.3320

NZD/USD: 0.6653 – 0.6770

AUD/JPY:75.23 – 76.34

AUD/NZD: 1.0832 – 1.0834

AUD Thoughts

- AUD/USD struggles to keep bounces off 50-day SMA, seesaw around seven-week-old support trend line.

- Risk aversion helped bears to cheer the biggest losses since early August.

- Fears of bigger virus wave 2.0, economic activity suppression and US stimulus deadlock were main contributors.

- Comments from RBA’s Debelle can entertain markets amid a light calendar day.

AUD/USD fails to bounce off the lowest since September 09, marked the previous day, while taking rounds to 0.7225 at the start of today’s trading session. With the risk-off mood at its full steam, markets rushed to the US Dollar while dumping everything else including equities, commodities and linked currencies. Searching for the reasons, coronavirus (COVID-19) resurgence could be cited as the main catalyst whereas uncertainty over the US aid package and downbeat comments from Europe, the UK and the US policymakers also joined the line.

Looking forward, Guy Debelle, Deputy Governor of the Reserve Bank of Australia (RBA) is up for speaking at 00:30 GMT and will be closely followed for fresh impetus. The title of the speech at the Australian Industry Group conference is "The Australian Economy and Monetary Policy" and will be the key to predict short-term AUD/USD moves ahead of the second day of the Fed Chair’s testimony.

Although 50-day SMA, currently around 0.7195, helped AUD/USD to close beyond an ascending trend line from August 03, at 0.7225 now, buyers are likely to remain unconvinced unless the quote crosses the 0.7340/46 area comprising August 31 low and multiple highs marked from September 03.

Event Risk Data Today

Australia: Weekly payrolls to 5 Sep are expected to show some improvement post August figures reflected Victoria’s lockdown (prior: -0.4%). RBA Deputy Governor Debelle will speak at 10:30am on “The Australian Economy and Monetary Policy”.

Europe: A second wave of Covid cases in the region is expected to pull back consumer confidence’s recovery (prior: -14.7, market f/c: 15.0).

US: Lower mortgage rates have boosted the housing market as the economy reopened. Existing home sales (prior: 24.7%, market f/c: 2.4%). Improving conditions are supporting manufacturing sentiment, according to the Richmond Fed index (prior: 18, market f/c: 12).

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