AUD May Erase Gains Amid US-China Tension After Tech Stocks Cratered

Australian Dollar, New Zealand Dollar, Coronavirus, US-China Relations – TALKING POINTS

• Technology stocks cratered in Wall Street trade after alarming jobless data print

• Australian Dollar selling pressure could rise as US-China continue to escalate

• AUD/NZD retreating from five-year resistance again – where will it go next？

Stocks on Wall Street ended on a gloomy note. The Dow Jones, S&P 500 and Nasdaq indices closed 1.31, 1.23 and 2.29 percent lower, respectively. In the S&P 500 benchmark, information technology took the hardest hit, specifically under the technology hardware, storage & peripherals subcomponent. Apple Inc – the second largest company in the indexs weighting system – fell and helped drag the S&P 500 lower.

Amazon and Microsoft – also considered to be index heavy weights – were also steeped in red which contributed to the overall decline across US equity markets, specifically for the technology sector. Stocks were hit hard after initial jobless claims data – a highly-scrutinized statistic amid the pandemic – showed a worse-than-expected print.

These claims jumped by 1416k, far above the 1300k estimate and reinforced fear about the severity and duration of the virus-induced recession. Secretary of State Mike Pompeo gave an arguably provocative speech on US-China relations shortly after the government ordered the shutdown of the Chinese consulate in Houston. Beijing has vowed to retaliate but has not made it clear how.

Fridays Asia-Pacific Trading Session

Asia-Pacific trade brings a light raft of economic data which will likely then put the focus for investors on fundamental themes. Escalating US-China trade tensions will likely continue to dampen sentiment and punish-cycle-sensitive assets like AUD and NZD while giving a tailwind to USD and JPY. Sentiment-linked commodities like crude oil may also suffer with the risk of gold and silver retracing some of their recent gains.

AUD/NZD Analysis

AUD/NZD has struggled to break above a five-year descending resistance channel despite spiking 6.30 percent from the March lows. The rejection at the slope of depreciation with follow-through could signal the start of a broader decline. Downside momentum may slow at the first layer of support at 1.0521, but if selling pressure remains acute it could open the door to testing a secondary substrate at 1.0484.