AUD/USD: Depressed below 0.7200 after printing the biggest losses in two weeks

• AUD/USD remains on the back foot near 10-day SMA after taking a U-turn from the yearly high.
• US dollar index bounced back from 27 month low and surprised markets with a little backup.
• The receding cases in New York and Florida, FOMC minutes and short-covering were called for as reasons.
• No major data/events will keep qualitative risk catalysts in the driver’s seat.

Following its run-up to the 18-month high, before taking a U-turn from losing around 100-pips in a day, AUD/USD stays pressured around 0.7180 at the start of Thursday’s Asian session. While the coronavirus (COVID-19) headlines and the broad US dollar weakness helped the aussie pair to remain strong during the early Wednesday, the greenback’s surprise run-up weighed on the risk barometer afterward.

Return of the bears?

Although marking a spectacular performance the previous day, the AUD/USD bears are less likely to be called back as the move lacked any major fundamental support except for the US dollar index (DXY) bounce off May 2018 lows.

Some on the floor argue that a weaker pace of rising in the COVID-19 cases from New York and Florida becomes the main catalyst while others suggest hopes of the US stimulus as the reason. Some others dig the latest Federal Open Market Committee (FOMC) minutes and say a lack of reference to the yield curve control could be a force. Furthermore, the downbeat performance of the Aussie Westpac Leading Index, from 0.5% to 0.05%, was also blamed for the quote’s declines. Though, a strong justification could come from the short-term position consolidation amid a light calendar.

At home, Australian Prime Minister (PM) Scott Morrison stepped back from the early comments to make the virus vaccine mandatory. Earlier, the Pacific nation made a pact with Oxford University-AstraZeneca to have the right to produce it if proven effective. The news preceded another decline in the virus figures at home with 217 new cases for Tuesday.

Elsewhere, the US and China stayed apart from the trade deal and American policymakers go invisible after hinting pandemic aid package.

Against this backdrop, Wall Street marked mild losses while the US 10-year Treasury yields gained 1.6 basis points to end Wednesday around 0.685%.

Looking forward, the Asian economic calendar keeps mum for Thursday and makes the pair traders observe risk catalysts more closely to find anything new that can help retrace the latest losses.

Technical analysis

Despite the failure to cross 2019 top surrounding 0.7300, AUD/USD prices are yet to break a 10-day SMA level of 0.7180 and a monthly support line near 0.7130, which in turn keeps bulls less carried away with the latest fall.