Forex Market: AUD/USD set for second weekly gain as positive data offsets virus spread concerns

AUD/USD advanced for a fifth straight trading day in subdued trade on Friday and was set to register its second week of gains in a row, as largely positive macro data from China and the United States outweighed concerns over COVID-19 resurgence across the US and elsewhere.

All segments of the US economy, excluding the farming industry, added 4.8 million jobs in June, or the most since comparable series began in 1939 and well above market expectations of a 3.0 million jobs gain.

At the same time, a business survey showed China’s services sector had registered the sharpest expansion in more than 10 years in June, as lockdown restrictions were gradually relaxed.

The Aussie benefited from recent upbeat domestic data as well. Retail sales in Australia increased at a record monthly rate of 16.9% in May, while outstripping a consensus of estimates and following a record monthly drop of 17.7% in April. Sales of clothing, footwear and personal accessories soared 129.2%, those at cafes, restaurants and takeaway food services went up 30.3%, while sales of household goods rose 16.6% in May from a month ago.

Against this positive macroeconomic backdrop, the United States reported over 55,000 new COVID-19 infections on Thursday, or the sharpest single-day surge since the start of the pandemic. The total confirmed cases of the illness globally have already surpassed 11.015 million, while the death toll has exceeded 524,000, the latest numbers showed.

As of 11:50 GMT on Friday AUD/USD was edging up 0.12% to trade at 0.6935, while moving within a tight daily range of 0.6914-0.6941. The major pair has gained 1.02% so far this week and was set to record its best performance since the business week ended June 5th.

Markets in the United States will remain closed on Friday due to the observation of the Independence Day federal holiday.

Bond Yield Spread

The spread between 2-year Australian and 2-year US bond yields, which reflects the flow of funds in a short term, equaled 9.6 basis points (0.096%) as of 10:15 GMT on Friday, up from 9.3 basis points on July 2nd.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.6927
R1 – 0.6952
R2 – 0.6977
R3 – 0.7002
R4 – 0.7027

S1 – 0.6902
S2 – 0.6877
S3 – 0.6852
S4 – 0.6827