AUDUSD pushing against near-term support at 0.6415
- AUD/USD reversal from 0.6450 reaches near-term support at 0.6415.
- The Australian dollar loses ground and the US dollar strengthens as market mood worsens.
- FX strategists at UOB see warn about a downtrend towards 0.6250.
The aussie is losing ground on Wednesday, after a tame recovery attempt seen earlier this week, to test immediate support at 0.6415/20 area. AUD/USD upside attempts have been capped twice at 0.6450 area, and the pair is building up negative momentum, with the USD gaining strength as market sentiment worsens.
USD buoyed by risk aversion and geopolitical tensions
The Australian dollar is losing ground with the greenback favoured by a mild risk-off tone on the back of a grim US employment report and escalating tensions between US and China.
The US ADP employment report has forecasted a 20.2 million decline on US private payrolls in April. A record blow to the US labor market that has heightened concerns about the economic impact of the coronavirus shock and has dampened a certain relief triggered by the plans to start lifting restrictions.
Furthermore, the escalation of tensions between US and China in relation to the coronavirus pandemic has boosted safety flows, favouring the US dollar against riskier assets like the AUD.
AUD/USD downtrend could extend towards 0.6250 - UOB
The FX analysts’ team at UOB expect further weakness on the Australian dollar, which might drop as far as 0.6250: As highlighted, the pullback from last week’s 0.6570 high has scope to extend lower to 0.6300, possibly 0.6250. That said, downward momentum has not improved by much and 0.6300 may not come into the picture so soon. On the upside, only a break of 0.6520 (no change in ‘strong resistance’ level) would indicate the current downward pressure has dissipated.”
AUD/USD key levels to watch