AUD/USD fell to a four-session low on Friday as trade concerns and resurgent COVID-19 outbreaks weighed on global recovery hopes, diminishing aussie bulls' confidence to push toward a break higher from the current consolidation range of 0.6670/0.7070.
China's warning to the U.S. over meddling nFWN2E30J8 increased worries about risks to the phase one trade deal, adding to investor apprehensions about broadening coronavirus cases in the U.S.
Falling stocks and safe-haven flows into the yen and U.S. dollar helped drive AUD/USD below the 21-day moving average, which has been providing support since early April.
Giving some encouragement to bulls, AUD/USD remained in its consolidation phase and was holding above critical support near 0.67770/80.
Options could provide further support, with risk reversals showing vol premium for puts over calls continuing to erode.
Also, fed funds futures prices FFQ1 remained elevated, pricing in slightly negative rates for early Q3 2021.
If the latest bout of risk-off sentiment were to fade, AUD/USD would have a high probability of resuming its rally from the March low and testing resistance near 0.7200 and 0.7300.
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