Forex Market: AUD/USD retreats despite upbeat Australian retail sales as new COVID-19 strain pressures sentiment

AUD/USD continued to retreat on Tuesday, disregarding an upbeat domestic retail sales report, as a new, more infectious strain of COVID-19 kept pressuring demand for risk-sensitive assets because of global recovery-related concerns.

Yesterday the Aussie fell to a 1 1/2-week low of 0.7462 against its US counterpart, before recouping a portion of that loss later in the day, as the announcement of strict virus-related restrictions in the UK delivered a blow to investor risk sentiment.

Still, AUD/USD was on track to register its second straight month of gains, recently supported by prospects of a vaccine-driven recovery in 2021, the relative outperformance of the Australian economy and a rally in global commodity prices.

However, the market shrugged off better-than-expected Australian retail sales data in November (7.0% growth), reported earlier Tuesday, as subdued sentiment and a new outbreak in Sydney pressured Australian equities. Australia’s ASX index extended losses from the prior two trading sessions on Tuesday to close 1.08% lower.

As of 10:10 GMT on Tuesday AUD/USD was losing 0.65% to trade at 0.7534, while moving within a daily range of 0.7529-0.7591. Last week it climbed as high as 0.7640, or its strongest level since June 7th 2018 (0.7673). The major pair has risen 2.63% so far in December, following another 4.48% surge in November, or its best monthly performance since April.

In terms of US macroeconomic data, today market players will be paying attention to the final GDP report for Q3 due out at 15:30 GMT and to the December report on consumer confidence due out at 17:00 GMT.

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 -2.8 basis points (-0.028%) as of 9:15 GMT on Tuesday, up from -2.9 basis points on December 21st.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.7551
R1 – 0.7640
R2 – 0.7695
R3 – 0.7784
R4 – 0.7873

S1 – 0.7495
S2 – 0.7406
S3 – 0.7350
S4 – 0.7295

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