AUD/USD: On the back foot below 0.6600 amid coronavirus fears

• AUD/USD fails to extend Friday’s pullback.
• Increasing coronavirus cases outside China weigh on markets.
• A lack of data/events at home will keep concerning news in the spotlight.

AUD/USD declines to 0.6592 during the early Monday morning in Asia. In doing so, the pair remains on the back foot while extending losses after the gap-down to 0.6600 portrayed at the start of this week’s trading session. With the coronavirus cases outside China gaining pace, the global risk barometer continues to trade south.

Read: What you need to know for the open: Coronavirus risk-off themes rule the waves

Coronavirus is the key…

While China remains the major victim of the deadly coronavirus (COVID-19), an outbreak of cases outside the dragon nation has recently gained the market’s attention. As per the latest updates, Italy rang the alarm with confirmed cases rising from three on Friday to more than 130 by Sunday. Japan registers the largest numbers of infected people outside China whereas South Korea, Italy, Singapore and Hong Kong joining the line in that order.

Global PMIs are yet to show the full impact of the deadly virus that emanated from China’s Hubei province. Even so, the latest numbers have been a signal that the trade sentiment is yet to suffer more as global top-tier companies acknowledging headwinds in manufacturing due to the supply disturbance from Beijing.

Europe recently grabbed the spotlight due to the epidemic outbreak in Italy. However, the EU Economic Affairs Commissioner Paolo Gentiloni was spotted by Reuters, while speaking after the G20 meeting in Riyadh on Sunday, “the EU has full confidence in the Italian authorities and the decisions they are taking." The European Union “shares the concern” but sees “no need to panic”, as per the EU diplomat.

The Telegraph came out with the news that China’s President Xi Jinping acknowledged coronavirus shortcomings as Iran, South Korea reported new deaths.

With the global economy still struggling with mixed numbers from the top-tier players and renewed fears of the Japanese recession, a blow to the market’s risk appetite seems to continue weighing on the AUD/USD. To forecast the near-term direction, traders will keep eyes on the coronavirus headlines amid a lack of major data/events at home.

Technical Analysis

Unless successfully trading beyond 0.6660 mark, fears of the return of early-March 2009 high surrounding 0.6560 can’t be denied.