Faces Headwinds

The greenback finished stronger on Wednesday, pressuring AUD/USD lower. The pair ground lower the session and holds near session lows, last at 0.7612, yesterday's low at 0.7601.

• Tensions with China continue to simmer, China's ambassador to Australia Cheng Jingye said China would respond in kind to any provocation. "Any people or any country should not have any illusion that China will swallow the bitter pill of interfering or meddling in China's internal affairs and trying to put so-called pressures on China," he said, adding "we will not provoke, but if we are provoked, we will respond in kind." On the home front Australia trade minister Tehan called on businesses to help mend relations with China. There were reports this morning that following a spat with Australia China has turned to US coal to fill void created by Australia import ban.
• CBA says AUD could face headwinds on vaccine concerns: "AUD/USD may be weighed down by concerns about the safety of the vaccine developed by AstraZeneca (AZ). The UK medical regulator has advised those under 30 years not be vaccinated with the AZ vaccine because it has been associated with blood clots. Similarly, governments in Italy, France and Germany recommend the AZ vaccine only be given to people over 60 years. Australia has ordered 2.2 doses per person of the AZ vaccine amid slow inoculation, constrained imports and slow local vaccine production. While Australia has also ordered 2.0 doses per person of the Novavax vaccine too, Australia's native manufacturing capacity is for the AZ vaccine only. The bottom line is Australia's inoculation will continue to lag other countries in the near term and in turn keep the risk of localised lockdowns alive."
• From a technical perspective AUD/USD remains above recent lows having recovered from 0.7532, Apr 1 low. Nonetheless, the outlook remains fragile. The pair has recently breached support at 0.7563, Mar 25 low and also cleared the Feb 2 low of 0.7564. This reinforces the current bearish theme following the confirmation of a head and shoulders reversal pattern on Mar 23. This has opened 0.7517 next, Dec 22 low. On the upside, initial resistance is seen at 0.7684, the 50-day EMA.
• Iron ore remains elevated, data yesterday showed shipments from Australia including Port Hedland slowed to 18.3m tons in the latest week, slowing from 18.9m in the previous week which denoted the highest since 2020.
• There is no domestic data on the economic docket tonight, Australia will sell a total AUD 1bn in 3-,6-month bills.