AUD/USD slumps to fresh multi-month lows below 0.70 as China retaliates with tariff hikes

• China decides to raise tariffs on $60 billion worth of U.S. goods.
• US Dollar Index extends slide, drops to 97 area.
• Coming up: National Australia Ban's Business Conditions Index. 

The AUD/USD came under a renewed pressure in the last hour and touched its lowest level since January 2 flash crash at 0.6962 with the initial reaction to China announcing higher tariffs on U.S. goods. As of writing, the pair was down 0.35% on a daily basis at 0.6975.

With the latest round of trade negotiations in Washington on Friday failing to break the deadlock, China responded to the U.S. decision to hike tariffs on $200 billion worth of Chinese good by introducing its own hike. According to a statement published by the Chinese finance ministry, starting June 1st, China will raise import tariffs on 5140 U.S. products ranging from 5% to 25%.

This development also seems to be weighing on the market sentiment, sending the 10-year U.S. Treasury bond yield to its lowest level since late March at 2.416% and weighing on the greenback. The US Dollar Index, which tracks the greenback's value against a basket of six major currencies, was last down 0.25% on a daily basis at 97.08.

There won't be any macroeconomic data releases from the U.S. in the remainder of the day and participants will be paying close attention to the risk perception. At the moment, the S&P 500 Futures is losing more than 2% on the day, suggesting that major equity indexes are set to open the day sharply lower and force investors to stay away from risk-sensitive assets. In the early trading hours of the Asian session, the National Australia Bank's Business Conditions Index could be the next catalyst for the pair.

Technical levels to watch for