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AUD/USD extends recovery gains to 0.6850 despite China’s coronavirus harming risk-tone

  • AUD/USD concentrates more on upbeat CBA Manufacturing PMI to keep the previous day’s gains triggered by Aussie jobs data.
  • Risk negative headlines from China joins trade war fears.
  • Qualitative catalysts, US Markit PMIs will offer a busy day ahead.

AUD/USD stays on the front-foot while taking rounds to 0.6845 amid the initial Asian session on Friday. The pair recently reacted to the preliminary readings of the Commonwealth Bank (CBA) PMI details for January. In doing so, Aussie buyers paid a little heed to news concerning the outbreak of China’s coronavirus.

The CBA’s January month PMIs flash mixed results as the headlines Manufacturing PMI crossed 49.0 forecasts to 49.1 whereas Services PMI lagged behind 49.5 expected to 48.9. With this, the Composite PMI lagged below 49.6 prior to 48.6. Even if all of the activity numbers released by the CBA remained in the contraction region, traders favored the Aussie buying especially after Thursday’s welcome prints of jobs report that cut odds of the Reserve Bank of Australia’s (RBA) rate cut.

On the other hand, the market’s risk tone has been weighed down by the headlines coming from China that renews fears of Severe Acute Respiratory Syndrome (SARS) virus that resulted in 774 deaths in 26 countries during the year 2002/03. Although the World Health Organization (WHO) still needs some time to consider coronavirus as an international threat, there have been 17 deaths so far due to the same. The recent update concerning the virus outbreak comes from Japan that confirms the second case of coronavirus.

Elsewhere, the US is ready to extend its trade war to the European Union (EU) and the UK. While the UK might step back due to the better relations between the US President Trump and British PM Boris Johnson, the EU might stand tall due to being the largest customer of the US.

That said, the US 10-year treasury yields extend their south-run to 1.73% by the end of Thursday’s trading whereas the S&P 500 Futures recover mildly to 3,326 by the press time.

Moving on, headlines concerning the global trade and China’s coronavirus will be the key to watch. Though, the importance of the preliminary Markit PMIs from the US can’t be ruled out.

Technical Analysis

A confluence of 200-day SMA and monthly trendline, near 0.6880 limits the pair’s short-term upside.

 

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