AUD/USD: where next, much to consider, eyes on break of 10-D SMA?
- AUD/USD looks steadied around the 10-D SMA.
- AUD/USD awaits retails sales as next potential catalyst.
- What is the latest on trade wars?
AUD/USD has been tucked below the rising weekly ascending trendline for the second time since 2017, stabilising just above the rising 100-D SMA while markets were unable to take anything out of the same-same RBA statement - (The RBA decided to keep the cash rate unchanged at 1.5% acknowledging that the global monetary tightening is in place). Currently, AUD/USD is trading at 0.7685, up 0.12% on the day, having posted a daily high at 0.7709 and low at 0.7650.
US stocks rebound after yesterday's selloff, but lacked conviction
AUD/USD was starting out overnight on the backfoot as investor's concerns over trade war angst and a slump in metal prices, ( The RBA Commodity Price SDR was released by the Reserve Bank of Australia, -2.1%, and is considered as an early indicator of export price changes), before a recovery was seen in general commodity prices, that equated to a short squeeze where AUD/USD was met 0.7692 before 0.7706 highs. AUD/USD was then in a chop down (profit taking) to 0.7678 before a recovery to 0.7702, then back to 0.7667 before back to 0.7688, (just above hourly cloud top and European pullback low). Markets will now turn to today's retails sales data and Chinese services as the next potential catalysts.
The latest on China/US trade war
Looking ahead, all eyes are on China and the US's attempts to go head to head, with a global alliance, albeit a reluctant one at that, with China in terms of trade. The latest developments there have been positive albeit, the market feels that these tensions will be the new norm.
America’s waiting period before officially implementing its most severe tariffs and China’s decision to not include such items as soybeans and aircraft in its initial package of counter tariffs indicate a willingness on both sides to negotiate," analysts at National Bank of Canada argued.
Analysts at National Bank of Canada raised further key points on the matter:
- The United States also doesn’t want any major geopolitical headwinds to disrupt its economy and financial markets, particularly before the upcoming mid-term congressional elections.
- China can ill-afford a full-blown trade war at a time when it is trying to implement major structural reforms.
- It is also dealing with the challenges of rising wages, high debt levels, a rapidly ageing population and significant air/water pollution.
- Complicating matters further is the widely held view among leading nations that China must change its trade practices.
- Heightened trade tensions between the two will be the new normal for the foreseeable future.
- The stakes are too high.
- Even more important than trade deficits is the battle to see which country will control the world’s next cutting-edge technologies and emerge as the dominant global power.
AUD/USD levels
While MACDs and Slow Stochastics suggest a low may be close, daily closes below 76.4 Fibo at 0.7651 (recent low) and a break below 0.7643 could set off a test of the 0.75 handle. On a break higher and through the rising weekly support line and a 200-D SMA just above 0.78 the figure, 0.7910 is open.