The aussie turned into a corrective mode on Wednesday, after a rejection from three-week highs around 0.6860 yesterday. The recent two-day rally looks overdone, with profit-taking looking fairly attractive and reasonable at current levels, considering the prevailing risk-off sentiment in the global financial markets.
Risk aversion intensified overnight after Trump indicated a possibility of striking a trade deal with China after the 2020 election. Moreover, China vowed to retaliate against the US on Hong Kong and Xinjiang bills and highlighted that it will not set any timeline or deadline for trade deal with the United States. Against this backdrop, risky assets including the Australian dollar came under the selling pressure.
AUDUSD has been challenging the 100-DMA and looks set to test the 0.68 figure as traders have already digested yesterday’s RBA decision to keep rate on hold. The pair received a boost from the central bank’s meeting as monetary authorities showed commitment to keep its cash rate on hold and assess the effect of previous cuts.
Now, the additional downside pressure comes from the domestic economic data. The Australian economy expanded by a less-than-expected 0.4% in the third quarter, with the annual figure came in at 1.7%. Despite the result improved from the previous quarter's 10-year low, growth remained below trend.