AUD/USD reversal extends to 0.6833 lows against a firmer US dollar

• AUD/USD reversal from 0.6975 extends to intra-day lows at 0.6833.
• The US dollar loses appreciates with equity markets off highs as market mood sours.
• Below 0.6905 we could see a move back to 0.6777/75 or lower – Credit Suisse.

Australian dollar’s reversal from day highs at 0.6975 during Tuesday’s Asian session has extended more than 100 pips lower to 0.6833 during the US trading session. The aussie is giving away gains after a 2.8% rally on Monday and early Tuesday, as risk appetite plummeted on the back of fears about a second wave of COVID-19 that might cripple the economic recovery.

US dollar strengthens as the market mood sours

The AUD/USD appreciated on Monday, buoyed by a risk-on flow that pushed equity markets higher and weighed the safe-haven USD. The positive trend saw some follow-through on Tuesday although the pair lost steam following the dovish minutes by the Reserve Bank of Australia. The RBA warned about the downside risk for the economy from the coronavirus pandemic and committed to extending its policy support for as long as necessary.

Investors' sentiment has deteriorated further during the US session, after a strong opening, following the upbeat US retail sales and industrial production data. Fresh news about an increase of coronavirus infections in the US and Beijing’s decision to restrict travel have crushed appetite for risk, pushing the safe-haven USD higher across the board.

AUD/USD: Below 0.6905 we could see a move back to 0.6777/75 – Credit Suisse

The FX analysis team at Credit Suisse sees the AUD sees the pair in a consolidative phase, that could be broken on a move below 0.6905, “Near-term support is initially seen at 0.6905, removal of which would see a move back to 0.6777/75, which ideally holds to keep the immediate upside bias intact. Removal of here though could see a move back to 0.6696/51, where we would expect to see a more concerted effort to hold.”

AUD/USD key levels to watch