• The Australian dollar is under immense pressure against the dollar, with the AUD/USD pair sliding to one-month lows.
  • Euro weakness persists Wednesday morning as the escalating COVID-19 situation continues to weigh on traders’ sentiment.
  • Gold is holding firm against a rising dollar, with US WTI oil tanking below the $60 a barrel level amid demand concerns.

Risk aversion is the tone driving sentiments in the currency markets as the yen and the dollar continue to strengthen across the board. Commodity currencies led by the Australian and New Zealand dollar are being hammered and struggling at key support levels. The euro and the British pound also feel the dollar’s weight that continues to strengthen even on yields retreating from 14-month highs.

Aussie sell-off

The Aussie has dropped to one-month lows against the dollar as it continues to feel the full force of a strengthened dollar. The AUD/USD pair has since eased through its 100-day moving average, closing below the 0.7600 for the first time in more than a month.

AUD/USD chart

After the recent sell-off, 0.75630 is the immediate support level, a breach of which could accelerate the sell-off lower. Below the 0.7500 handles, the pair could plunge to the 200-day moving average around the 0.7370 level.

Aussie weakness has been exacerbated by continued pressure in Chinese stocks on the PBOC, pulling short-term liquidity. Depressed sentiments on Chinese assets continue to impact the Aussie negatively. Similarly, AUD sentiments are being hammered by commodity prices retreating from recent highs.

Euro weakness

Euro is another currency feeling the full force of a strengthened dollar. The common currency has dropped to its 200-day moving average against the dollar as its outlook continues to look increasingly bearish.

EUR/USD chart

After breaking below a trend line support stretching to November at 1.865, buyers will have to protect the 1.836 regions if EUR/USD bounces back. A breach of the support level at the 200-day moving average could accelerate the slide and into the 1.1700 handle.

While dollar strength has had a bigger role in the euro slide in recent days, the block has had no solid positive news to curtail further downside action. An escalating pandemic situation that has resulted in the extension of lockdowns curbs in Germany has all but continued to fuel economic recovery concerns.

Germany has confirmed a climb of active cases to 170,000, the highest since February 9, with total deaths climbing to 75,212 people. As long as the 7-day incidence level remains at elevated levels, it is highly unlikely that authorities will ease lockdown restrictions. Likewise, economic data have not been impressive to offer solid support.

Oil Sell-Off

A slump in oil prices persisted in early Wednesday, with US WTI oil tanking below the $60 a barrel level to $57 a barrel. Brent crude was also down to about $60.8 a barrel. The two are down by more than 10% from their recent highs.

WTI chart

The sell-off in the oil markets stems from growing demand concerns. Escalating COVID cases forcing some countries to impose lockdown restrictions have continued to fuel fears over an uptick in demand highly needed to offset current supply levels.

Germany extending lockdown restrictions to April 18 weighed heavily on oil prices, given that it is the biggest consumer of the commodity in Europe.

Adding pressure to oil prices is a jump in US crude oil stocks by 2.9 million barrels last week. Analysts were expecting a decline of 300,000 barrels.

Gold Holds Firm

On the other hand, Gold continues to hold firm against the dollar, with $1730 emerging as the new support level. Gold futures were up by 0.34% Wednesday morning to 1730.90. The rally came even on the dollar, which moves inversely to the yellow metal powering high.

XAU/USD chart

The rally in the bullion came as yields tanked on FED Chair Jerome Powell, telling congress that inflation will rise over the year but won’t be large as feared. Optimism that inflation will remain under control offered support to the broader market after a recent spike in yields to 14-month highs.