The AUD/USD pair closed at 0.69719, after placing a high of 0.70124 and a low of 0.69628. Overall, the movement of the AUD/USD pair remained bearish throughout the day. After posting gains for two consecutive days, the AUD/USD pair dropped on Thursday, amid a soured risk sentiment. The strong US dollar and disappointing Unemployment Rate figures from Australia weighed on the AUD/USD pair.

The risk sentiment, which was raised earlier, due to optimism regarding the coronavirus vaccine, kept the Aussie, which is perceived as risky, in demand, and its prices on the high track. However, the optimism eventually faded, and the risk-off market sentiment emerged, due to increasing tensions between the US and China.

These tensions have been increasing over many issues lately. This week the US announced that it no longer consider Hong Kong as separate from mainland China, and revoked Hong Kong’s preferential trade status. This would imply the ongoing US tariffs on products from Hong Kong too. Earlier, the US imposed visa restrictions on certain employees of the Huawei Tech Company and against the Chinese Communist Party officials involved in human rights abuses in the Xinjiang region of northwest China.

In response to this, on Thursday, the Chinese technology giant Huawei expressed its regret over the US move to ban its employees from visiting the US. Huawei called this move by the US “an unfair and arbitrary action.” Furthermore, the US Justice Secretary, William Barr accused Hollywood and US tech firms of working with the Chinese government, with a view to doing business there. Barr said that such actions undermine the liberal world order.

Speaking at the Gerald Ford Presidential Museum, he warned that China was pressurizing US firms to work with them. As a result, US firms were giving up secrets and compromising values, which would eventually make the US vulnerable and dependent on China for certain goods.

This was the latest criticism of China by the White House and other US officials. He warned that the Disney and  American cooperation with Beijing would dent competitiveness and prosperity. He urged US firms to defy Chinese demands, and said that if an individual company is not able to take a stand, then firms should combine against China.

The escalating tension between China and the US kept the Aussie, which is perceived as risky, under pressure, due to increased demand for the safe-haven asset. The AUD/USD pair suffered, due to risk-off momentum.

However, on the data front, the Employment Change from Australia for June was released at 6:30 GMT, showing that 210.8K jobs were created in Australia against the expected 106.0K jobs, lending support to the Australian dollar and keeping the additional losses in the AUD/USD pair in check. However, the Unemployment Rate for Australia in June increased to 7.4% from 7.1% in May. This weighed heavily on the Australian dollar and added to the losses on the AUD/USD pair on Thursday.

Despite increased job creation, the Australian people refrained from returning to their jobs, and the continued demand for unemployment benefits suggested less confidence among the people over the Australian economy, due to the increased number of coronavirus cases in the area.

On the US front, the economic data on Retail Sales and Core Retail Sales came in higher than expected, lending support to the US dollar. The Retail Sales and Core Retail Sales surged to 7.5% and 7.3% respectively in June, weighing on the AUD/USD pair.

Daily Technical Levels

Support Resistance

0.6951 0.7001

0.6931 0.7033

0.6900 0.7052

Pivot point: 0.6982

The AUD/USD pair is holding level at 0.6986, below a resistance level of 0.6995, which is extended by the downward trendline. A bullish crossover on this level could lead the Aussie pair towards the next target of 0.7015 and 0.7035 resistance. Simultaneously, the Aussie dollar could drop towards 0.6962, if it manages to hold below the level of 0.6995. Let’s wait for a trading signal as soon as the AUD/USD violates the symmetric triangle pattern. Good luck!