AUD/USD survived a test near the 0.7100 handle earlier to move back to 0.7120 but the aussie is staying pressured a little amid the escalating virus situation in Australia.
Melbourne announced further business closures today, adding to the stricter lockdown and curfew (first-time ever) introduced over the weekend.
While the aussie has risen on the back of recovery optimism over the past few months, it has not had much to deal with domestically as the health crisis was kept in-check.
But as things are worsening over the past few weeks, the situation is certainly calling for a rethink now that it is much more heavily impacting the domestic economy.
Looking at the near-term chart for AUD/USD above, price action shows that sellers are in control as price sits below both the key hourly moving averages.
Sellers also showed their conviction by defending a test of the 200-hour MA (blue line) today and are keeping the pressure on the support region at 0.7113-20 currently.
A push below 0.7100 will give fresh legs to the downside momentum and that will be a support region to watch out for in the sessions ahead.
For buyers, they need to get back above the 200-hour MA @ 0.7145 to try and wrestle back some near-term control for starters.
While AUD/USD has largely traded in similar vein as the S&P 500 over the past few months, the virus situation in Australia now adds some domestic risk factors to consider and that may see the correlation break down a little bit - or at least not be as strong.
That said, the pair should still generally trade more closely to risk sentiment but considering the worsening virus situation across the globe, there are reasons to be cautious.
Not to mention the stall in additional US stimulus and election uncertainty creeping into the picture also adds some headwinds for equities at the moment.
All of that will be weighed upon against central bank stimulus once again to see who will come out on top in the coming weeks.
As for the month of August, it is also seasonally one of the worst months for the aussie and that is perhaps something to consider as well.
The failure to hold a break above 0.7200 at the end of last week may perhaps be an indication of things to come in the currency pair this month. Or at least there's a good proposition considering the risk-reward based on the latest developments noted above.