Forex Market: AUD/USD gains on coronavirus vaccine hopes, US-China tensions may limit upside

AUD/USD looked set to snap a two-day streak of losses and traded not far from last Thursday’s one-month high during early European session on Monday, as hopes of a potential COVID-19 vaccine seemed to have offset concerns over the spread of the illness, reducing the haven appeal of the US Dollar.

Last Friday Gilead Sciences Inc announced that more data from a late-stage study revealed its antiviral remdesivir lowered the risk of death and led to a considerable improvement in conditions of patients severely affected by the novel coronavirus.

“When we talk about the dollar these days, it’s about the correlation with risk and that’s still happening now,” John Doyle, vice president for dealing and trading, at Tempus Inc., said. “I think the vaccine news is offsetting the surge in cases.”

Latest data by the Center for Systems Science and Engineering at Johns Hopkins University showed total confirmed cases in the United States had surpassed 3.2 million, while the illness had caused the death of more than 135,000 people. Florida reported the largest single-day increase in new COVID-19 cases in any state – 15,000, while Texas set another record for hospitalizations, with 10,410 patients now hospitalized.

Meanwhile, deteriorating US-China relations may cap upside for the trade-sensitive Aussie dollar. US President Trump said on Friday that relations between the two economic superpowers had been “severely damaged” by the pandemic, while a “Phase Two” of the trade deal was not a priority.

As of 7:14 GMT on Monday AUD/USD was edging up 0.29% to trade at 0.6970, after touching an intraday high of 0.6984 during late Asian session, or a level not seen since July 9th (0.7001), also a one-month high. The major pair went up 0.13% last week, while marking its third straight week of gains.

No relevant macroeconomic reports that may affect AUD/USD are scheduled to be released on Monday.

At 15:30 GMT Federal Reserve President for New York John Williams is expected to speak at the “LIBOR: Entering the Endgame” video webinar, organized by the Bank of England and the New York Fed.

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 12.1 basis points (0.121%) as of 6:15 GMT on Monday, up from 11.4 basis points on July 10th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.6948
R1 – 0.6971
R2 – 0.6993
R3 – 0.7016
R4 – 0.7040

S1 – 0.6926
S2 – 0.6903
S3 – 0.6881
S4 – 0.6860

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