AUD/USD plummets to session lows, further below 0.6600 mark

• AUD/USD witnessed a dramatic turnaround from 2-1/2-month tops set on Wednesday.
• Worsening US-China relations benefitted the safe-haven USD and exerted some pressure.
• Bulls seemed rather unimpressed by the optimism over a potential COVID-19 vaccine.

The AUD/USD pair extended its sharp intraday pullback from the highest level since mid-March and dropped to fresh session lows, below the 0.6600 mark in the last hour.

The pair failed to capitalize on its early uptick, instead witnessed a dramatic intraday turnaround from 2-1/2-month tops and the pullback was sponsored by some renewed US dollar buying interest. The greenback was back in demand amid worsening US-China relations and got an additional boost from a goodish pickup in the US Treasury bond yields.

It is worth recalling that diplomatic tensions between the world's two largest economies escalated further after the US President Donald Trump on Tuesday promised a strong reaction to China's planned national security law for Hong Kong. On the other hand, the Chinese government retaliated by threatening countermeasures against any US actions.

The latest developments overshadowed the recent optimism over a potential COVID-19 vaccine and hoped of a sharp V-shaped recover for the global economy. This, in turn, drove safe-haven flows to the USD, which eventually was one of the key factors that prompted some aggressive long-unwinding trade around perceived riskier currencies, including the aussie.

It will now be interesting to see if the pair is able to attract any dip-buying at lower levels or the current pullback marks the end of the recent bullish trajectory witnessed over the two months or so. Market participants now look forward to the release of Australia's Private Capital Expenditure data for Q1 2020, scheduled during the Asian session on Thursday.

Technical levels to watch

AUD/USD