AUD/USD: Coronavirus woes probe bulls near 18-month top above 0.7100

• AUD/USD kick-starts the week with a gap-down near 0.7130, keeps Friday’s pullback from 0.7228.          
• Victoria’s “state of disaster” weighs on the quote following a heavy rise in the pandemic cases.
• US Dollar bounced off two-year lows despite no agreement over fiscal stimulus, mixed US data.

AUD/USD extends Friday’s weakness while declining to 0.7129 at the start of Monday’s Asian session. In doing so, the aussie pair portrays a gap-down to begin the week after taking a U-turn from the highest since February 2019 by the end of the last week.

Read: Volatile August price action here we come, traders focussed on USD resurgence

It’s not a trend change…

While observing Friday’s notable fall from the multi-week high, coupled with the week-start gap-down, some of the AUD/USD bulls could be worried. However, the US fundamentals are still positive for the pair and shouldn’t be disappointing the bulls anytime soon.

The month-end pullback from over a two-year low by the US dollar index (DXY) favored the buyers to cash-out their profits. The move got additional support from the worsening of the coronavirus (COVID-19) conditions in Australia. The latest updates suggest Victorian authorities increasing lockdown restrictions for extra six weeks after witnessing +670 cases. On the other hand, the US pandemic numbers have been making rounds to 60,000 cases a day with problems in Texas being the key.

Talking about positives for the pair, the American Senators are still jostling over the much-awaited fiscal stimulus and recently failed to deliver the details of unemployment claims benefits that expired last week. The policymakers are to go on an annual vacation by next week and will have to agree over a trillion-dollar worth aid package, which is less likely. Additionally, statistics from the world’s largest economy have been sluggish off-late and have pushed global rating giant Fitch to downgrade the American credit outlook from stable to negative.

It’s worth mentioning that the upbeat prints of China’s official PMI numbers superseded mixed readings from Australia off-late. Recently, Australian Treasurer Josh Frydenberg said that Victoria lockdown to have significant economic hit.

Even so, Wall Street managed to cheer the rally tech stocks led-by Apple while the US 10-year Treasury yields remained pressured on Friday. Further, Gold managed to keep the bulls directed towards $2,000.

Moving on, month-start activity numbers and TD Securities Inflation for Australia will precede China’s Caixin Manufacturing PMI to offer immediately to the pair traders. However, major attention will be given to the headlines concerning the virus and the US fiscal package agreement. Forecasts suggest China’s private Manufacturing PMI to rise from 51.2 to 51.3. Though, bulls may witness a positive surprise considering upbeat NBS Manufacturing PMI from the dragon nation, which in turn could help the AUD/USD to ignore the recent pullback.

Technical analysis

10-day EMA near 0.7125 offers immediate support ahead of 0.7065/60 rest-zone, comprising the high of June 10 and July 24, to keep the bulls hopeful.

Also read: The Chart of the Week: AUD/USD toppy, H&S could be in the making