AUD/USD: On the back foot below 0.6700 ahead of Aussie Q4 Wage Price Index

• AUD/USD bears catch a breath near seven days’ low.
• Broad risk-off based on coronavirus fears, bearish RBA minutes failed trade-positive nears from China.
• Australia’s Westpac Leading Index, Wage Price Index will decorate the economic calendar, risk news will keep the driver’s seat.

AUD/USD awaits fresh direction near seven days’ low while taking rounds to 0.6690 at the start of Wednesday’s Asian session. The Aussie pair was hit hard during Tuesday as the dual negatives of RBA meeting minutes and coronavirus-led risk aversion ignored China’s readiness to cut more tariffs on the US goods, announce measures to boost foreign investments. Markets are now gearing up for the fourth quarter (Q4) Wage Price Index after taking due note of the Westpac Leading Index.

Bears cheer the dual powers of RBA minutes and coronavirus…

While RBA meeting minutes reiterated the policymakers’ bearish bias to keep the interest rates low, the coronavirus-led risk-off added strength into the Aussie sellers’ decision.

In addition to keeping the rates lower, the RBA minutes suggested the policymakers’ readiness to cut the benchmark rates while mentioning, “The board would continue to monitor developments carefully, including in the labor market, and remained prepared to ease monetary policy further if needed.”

As regards to coronavirus, the market’s refrained to respect the softening of coronavirus cases amid fears that the actual numbers are high, as cited by the Caixin, as well as the prolonged impact of the contagion.

With this, traders failed to cheer China’s announcement of further tariff cuts on 696 US goods. The Australia and New Zealand Banking Group (ANZ) terms it as facilitating the phase-one deal while saying, “China announced further cuts to tariffs on US products including agricultural goods such as pork, beef and soybeans and crude oil and natural gas. The tariff cuts are in addition to the cuts already announced as part of the Phase 1 deal, but are likely to be needed in order to achieve the USD200 billion of imports committed to as part of the Phase 1 deal.”

It should also be noted that Moody’s cut to China’s 2020 growth forecast to 5.2% from 5.8% expected earlier also offered weakness to the Aussie.

That said, the market’s risk-tone remained heavy with the US 10-year treasury yields trimming three basis points (bps) to 1.56% while Wall Street marking losses mainly based on Apple’s statement that cited fears of coronavirus.

US data remain stronger and so does the King Dollar…

In addition to the broad risk aversion that was helping the US dollar, upbeat performance of the New York Empire State Manufacturing Index also helped the greenback to remain strong.

Looking forward…

Australia’s Westpac Leading Index for January, prior 0.05%, could offer a little direction to the Aussie than the Q4 Wage Price Index, forecast 0.5% QoQ and 2.2% YoY.

Given the already bearish RBA minutes and a risk-off, traders are likely to refresh the decade low on any disappointing data. However, a noticeable positive response to the surprise also can’t be ruled out.

Technical Analysis

With sustained trading below 0.6700, AUD/USD prices are en-route to the yearly low surrounding 0.6660 that holds the key for further south-run towards 0.6600. Meanwhile, an upside break of 0.6700 will need to cross the multi-day-old falling resistance line, at 0.6715 now, to confront 21-day SMA near 0.6745.