AUD/USD struggles to defend 0.7300 as market fears grow

• AUD/USD remains depressed after reversing Friday’s corrective pullback.
• US/China data, Delta covid variant and geopolitical tension all beat the optimists.
• RBA Minutes may become a non-event as everything on the table is well known.
• US Retail Sales, Powell’s speech will be the key, not to forget risk catalysts.

AUD/USD holds onto the previous day’s bearish impulse around 0.7340 as Asian traders brace for Tuesday’s work.

The Aussie pair reversed Friday’s recovery moves at the week’s start, backed by risk-off mood while the latest bounce off 0.7318 could be linked to an absence of fresh catalysts. Though, headline challenges to the market sentiment remain on the table and direct the bears to the yearly low.

Among the key concerns, the spread of virus variant takes the front row as covid figures at home, as well as in the developed nations like the US, the UK and China, flash worrisome signs. While fears that the COVID-19 infections are likely to recall the early 2021 numbers in the global powerhouse weighed the traders’ mood, a yearly high of daily cases in Australia and extension of local lockdowns keep AUD/USD down, mainly due to its risk barometer status.

On the other hand, escalating tension over the Taliban’s takeover of Kabul and US President Joe Biden’s recent fears of such activities spreading out of Afghanistan, if not controlled, challenge the market sentiment. The Sino-American and the US-Iran jitters are also on the same line to challenge the mood and AUD/USD prices.

Furthermore, China’s Retail Sales and Industrial Production followed the US Michigan Consumer Sentiment Index to portray the growing fears of losing the economic momentum off the pandemic. The same could be witnessed in the latest softening of the US Empire State Manufacturing PMI for August, 18.3 versus 29.0.

Acting as an additional burden on the AUD/USD prices could be the chatters that the Fed is up for tapering in 2021. The latest comments were from Boston Federal Reserve President Eric Rosengren who said, per CNBC, “We have met the inflation criteria for tapering.”

Against this backdrop, Wall Street benchmarks closed mixed, despite the day-end bounce, whereas the US 10-year Treasury yields dropped 2.9 basis points to 1.268% by the end of Monday’s North American trading session.

As the risk catalysts occupy the driver’s seat and the RBA policymakers are neither expected nor eligible for a move, today’s RBA Minutes risk becoming a non-event for the AUD/USD traders. However, the US Retail Sales for July, expected -0.2% versus +0.6% prior, will be the key, followed by a speech from Fed Chair Jerome Powell at an online town hall event.

Technical analysis

AUD/USD stays pressured below 21-DMA around 0.7365, followed by 0.7410-15 area comprising multiple levels marked since early July. However, a monthly support line near 0.7320 restricts the quote’s immediate downside, a break of which will quickly drag the quote to the yearly low surrounding 0.7290-85.