AUDUSD Under Pressure Amid Australia Lockdowns As Gold Bounce Back Stalls

Jun 29, 2021 06:17 PM ET
AUDUSD Under Pressure Amid Australia Lockdowns As Gold Bounce Back Stalls
  • A spike in COVID-19 cases in Australia is taking a toll on AUD, sending the AUDUSD lower.
  • EURGBP pair is struggling for direction despite weakness in euro across the board
  • Gold is looking increasingly bearish after a recent rejection near the 1790 level.
  • US indices continue to trade at all-time highs ahead of a critical earning season.
  • Ethereum is trying to bounce back after a steep pullback.

AUDUSD fell to one-week lows on Tuesday, hurt by buying interest in the USD. The rapid spread of the Delta Covid variant in Australia is another headwind taking a toll on the pair. Half of the Australian population being placed under lockdown to curb the spread of the deadly virus also continues to take a toll on the AUD, consequently fuelling a move lower.

AUDUSD slide 

A slide below the 0.7550 level has left the pair exposed to the 0.75330 critical support level.

AUD/USD chart

A breach of the 0.7530 support level would leave AUDUSD susceptible to a slide back to lows of 0.7489 level.

The outlook on the AUDUSD pair is bearish as safe-haven demand for the US dollar remains intact. Traders are increasingly flocking the greenback in response to a spike in COVID-19 cases in Asia and Australia. The US dollar is also drawing support from the hawkish FED report on US monetary policy officials dismissing inflation concerns.

Australia struggling to contain the COVID-19 pandemic should continue to weigh on the AUD strength in the market. Slow economic recovery all but hints at the Reserve Bank of Australia maintaining its accommodative monetary policy.

EURGBP consolidation

The EURGBP is also struggling for direction against a backdrop of waning strength on the euro. The pair has struggled to rise past the 0.8600 level as the euro remains under pressure amid a dampening economic outlook.

EUR/GBP chart

Additionally, the pair has resorted to trading in a range with the 0.8583 level emerging as a critical support level curtailing any downside action.

The focus is on the European Central Bank President Christine Lagarde's speech. Her speech will come amid growing concerns about the Delta variant spoiling the continent's cherished vacations. Spain and Portugal have already imposed restrictions on tourists coming from the UK.

Gold under pressure

In the commodities market, gold remains under pressure after its bounce back after the recent sell-off, having stalled on renewed dollar strength. XAUUSD has hit strong resistance near the $1789 level, with bears remaining under control.

Immediate support on any move to the downside is seen at the $1760 level, below which the pair could plunge to the $ 1730's level. Hawkish FED weighs heavily on the precious metal. With the dollar near two-month highs, the XAUUSD looks set to remain under pressure.

XAU/USD chart

While gold did rebound in recent days after a massive sell-off, it continues to trade below its 100-day Moving Average, signaling bearish momentum. As the markets digest the prospects of tightening monetary conditions from the FED, the outlook on XAUUSD should remain bearish.

US indices rally

US stocks started the week on a roll, with major indices flirting with record highs. The NASDAQ and the S&P 500 hit all-time highs fueled by tech stocks as investors also placed bets on robust earnings season amid the current record low-interest-rate environment.

NASDAQ was up 140 points to highs of 14,500 as the S&P 500 rose 0.23% to close at highs of 4,290.61. However, the Dow Jones Industrial Average remains under pressure, dropping 0.44% to close at 34,283.

S&P 500 index

 

The bullish momentum in the equity markets comes from the FED putting realistic goalposts on monetary policy, which is helping investors absorb more risk in the equity markets. The rally also comes on investors using the opportunity to buy more stocks after recent pullbacks.

Ethereum bounce back

In the cryptocurrency market, Ethereum was yet again in a recovery mode after the recent slide lower. ETHUSD was up by more than 2% at the time of writing, powering through the $2,000 psychological level.

ETH/USD chart

Ethereum has come under immense pressure in recent days, struggling to rally past the $2,000 level. The weakness stems from waning cryptocurrency confidence in the aftermath of the Chinese crackdown on trading and mining activities.

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