The situation regarding Covid remains bleak in Australia, as Sydney reported its deadliest day of the entire pandemic on Monday. Major cities remain under lockdown, with armed forces on the streets limiting total traffic. Sydney is entering its 8th week of lockdown as the Delta variant wreaks havoc on the economy. Australia’s struggle against the Delta variant come as official numbers indicate just 26% of people above the age of 16 are fully vaccinated. Although major cities remain under strict lockdowns, case numbers continue to rise. The resurgence of a third wave of Covid highlights the potential for a double-dip recession in Australia, with the RBA highlighting that the near-term outlook has always been filled with uncertainty.

AUD/USD DAILY CHART

Chart provided by TradingView

AUD/USD continues to trade sideways despite growing fears over the Delta Covid variant in Australia. Local lockdowns throughout the country, coupled with weakening economic data from China, may continue to weigh on the Aussie. Retail sales and industrial production data from China came in weaker than expected last week, piling on the back of a severe drop in US consumer sentiment. Economic data, along with “Fedspeak” regarding a possible taper outline in the fall may also keep AUD/USD suppressed at current levels. Currently, the pair continues to float above the support zone found between 0.7300 and 0.7320. Should this level prove to hold, a retest of the September 2020 swing high around 0.7414 may be on the cards.

AUD/USD 30 MINUTE CHART

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Written by Brendan Fagan, Intern, 17 August 2021. DailyFX