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Yesterday, the US dollar index dropped to multi-week lows and hit the level of 98,906 points. The last time this indicator was near 98 points was in mid-April. It was during the height of the coronavirus epidemic. Yesterday, the greenback weakened amid the same reasons. However, at the moment, these reasons are considered to be positive. The world largest economies are lifting lockdown measures thus launching the global economic recovery. During the whole period of pandemic, the US dollar has been used as the main protective tool. That is why it is quite sensitive to rising or sliding anti-risk sentiment in the foreign exchange market.
The general weakening of the US dollar has somehow affected all USD-based pairs, including the AUD/USD pair, which reached a 12-week high. The Australian dollar was advancing due to its own reasons. For example, amid the anti-crisis plan unveiled by the Prime Minister of Australia. Nevertheless, the Australian dollar was following the US dollar. Thus, it stopped its growth this morning. Let's look at exact factors that are weighing on the US currency. Besides, we will find out why the US dollar index paused its fall during the Asian session on Wednesday.
Yesterday, traders reacted to the news about coronavirus. According to yesterday's data, the number of new victims of the pandemic in the world began to decline. During the day, 1,200 people died from COVID-19. However, this is the lowest figure in recent times. Previously, the indicator did not fall below 3,000 a day (on May 25, the number of infected people reached 3,000 and on May 24, there were 4,000). Although there is a daily increase in infected people worldwide (primarily due to Brazil and the US), many countries have begun to left the quarantine measures. In particular, Spain plans to end the lockdown for foreign tourists from July 1, Japan has already lifted the state of emergency whereas Montenegro became the first country in Europe to officially "free" from Covid-19. Germany will allow its citizens to visit the EU countries in summer. In Italy, gyms and swimming pools opened on Monday, theaters and cinemas will open in June, and from June 15, residents will be allowed to move between regions of the country.
In other words, almost all countries are reopening their economies. The US, which still remains the leader in disease cases, is not an exception. All 50 US states have partially resumed the operation of their enterprises. After a two-month break, the New York stock exchange started working again yesterday. Such actions contributed to a decline in anti-risk sentiment in the currency market. Trading on Wall Street is a good example. The main stock indices opened with a jump yesterday. In particular, the S&P 500 rose above a three-thousand mark for the first time since the end of February.
Such an optimistic mood amid Trump's silence concerning the Hong Kong issue put pressure on the US dollar index, allowing the AUD/USD bulls to enter the 66th figure and reach the level of 0.6676. The Australian dollar did not reach such heights since the beginning of March. However, yesterday, the US president broke the silence. During his traditional press conference, Donald Trump said that in a few days, he would announce measures that the US was planning to take against China in response to actions against Hong Kong. At the same time, he clarified that there would not be any sanctions. In fact, Washington is preparing something powerful.
We should remember that any uncertainty negatively affects traders' mood. The US-Chinese relations are extremely strained amid the fact the US publicly blames China for creating the coronavirus. Therefore, the recent announcements have frightened market participants. This statement was made by Trump at the end of the American session. Thus, the US dollar index showed positive dynamics during the Asian session, returning to the 99th figure. In other words, the market has again focused on the relationship between the US and China and until the intrigue declared by Trump is revealed, the US dollar index will stay afloat.
The AUD/USD pair got stuck stopping moving up in the middle of the 66th figure. The Australian dollar continues to show its resilience to negative fundamental factors. Amid concerns about possible Washington's actions, traders stopped opening long positions. Meanwhile, the AUD/USD buyers need to break the resistance level of 0.6650 (the upper line of the Bollinger Bands indicator on the daily chart). Otherwise, the pair may show a southern pullback to the base of the 66-price level within the day (on the 30-minute chart, the 0.6600 mark coincides with the lower border of the Kumo cloud). In the medium term, everything will depend on further US actions and China's the response.
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