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Aussie falters at key 70c handle as risk sentiment consolidates

AUD - Australian Dollar

Tuesday’s offshore sessions saw a consolidation in global risk appetite as equity markets were lower and the safe haven USD was higher. This saw the Australian Dollar trade sideways, ranging between 0.6925 and 0.6878 throughout overnight trade. Given the escalating situation in Victoria, the AUD/NZD cross was forced lower, slipping from 1.0630 to 1.0609, opening up the door for a move below 1.06.

The news of 191 new COVID-19 cases in Victoria yesterday led to the announcement of a 6-week lockdown in metro Melbourne and a closure of the Victoria-NSW Border by the Victorian government. The local currency, which was approaching the key 0.7000 handle at Asian open, was sold off nearly 60 points on the news to trade closer to 0.6930. As expected, the RBA maintained their monetary policy stance yesterday, holding the cash rate at 0.25% and delivered nothing of impact to markets.

As we head into a very quiet day on the data release front, we’re expecting the local unit to continue to trade in line with global risk sentiment. Due to the unfolding situation in Victoria, risks are seemingly skewed to the downside with immediate support at 0.6930 looking vulnerable. On the topside, key resistance at 0.7000 is still a big obstacle.

Key Movers

Taking a global look at the overnight session which seemingly had it all, the USD index was 0.3% higher across the board as risk sentiment consolidated as US-China trade tensions simmered and the strength of the US economic recovery was questioned. News that US Secretary of State, Mike Pompeo was looking at banning Chinese social media app TikTok and concerned comments from Fed official Bostic about what the recent spike in COVID-19 cases meant for the economic recovery stifled risk sentiment globally.

The Euro under-performed, falling from 1.1310 to 1.1260 before recovering slightly. The GBP was the best performer on the day, rising 0.6% against the greenback to trade around 1.12560 ahead of this week's Brexit negotiations.

Expected Ranges

AUD/USD: 0.6900 - 0.7000 ▼

AUD/EUR: 0.6130 - 0.6180 ▲

GBP/AUD: 1.7890 - 1.8110 ▲

AUD/NZD: 1.0580 - 1.0640 ▼

AUD/CAD: 0.9390 - 0.9480 ▲