The Australian Battler found itself slip sliding away on the back foot after risk sentiment soured on the heightened US-China tensions. AUD/USD closed at 0.6565 after trading to an overnight high at 0.6598 and its 0.6600 opening yesterday. Earlier this morning, ratings agency Fitch revised Australia’s Outlook to Negative while affirming its “AAA” rating. According to Fitch, the Negative Outlook” reflects the significant impact the global coronavirus pandemic has on Australia’s economy and public finances. Growth will fall sharply in 2020 and government spending in response to the health and economic crisis will cause large fiscal deficits and a large increase in the government debt/GDP. The AUD/USD pair did not react to the negative news, stuck at its current 0.6565 level.
Australia’s recent trade war with China threatened to spill over to its most valuable export, iron-ore. The Guardian reported that China’s customs officials are imposing new inspection procedures and rules from next month, which could be used to block or hold up Australian shipments. But miners and Australia’s trade minister say the changed inspection regime could actually streamline Australian Iron ore imports. According to the Communist party-run Global Times, the Australian imports could be damaged by worsening tensions between Canberra and Beijing. Aussie traders will continue to closely monitor these developments.
AUD/USD has immediate resistance at 0.6600 followed by 0.6630 today. Immediate support can be found at 0.6550 (overnight low 0.65488) and 0.6520. Look for consolidation today with a likely range trade between 0.6485-0.6595. Prefer to sell rallies.