- AUD/USD looks for direction ahead of the key catalyst.
- Phase-one optimism, upbeat data from China, USD weakness stopped the extension of Friday’s losses at the week’s start.
- RBA minutes will be watched closely for clues relating to further rate cuts in 2020.
AUD/USD trades near 0.6880 amid the initial Asian session on Tuesday. The pair manages to avoid losses on the previous day as broad US Dollar (USD) weakness joined welcome data from China and phase-one euphoria.
Downbeat figures of the United States (US) NY Empire State Manufacturing Index mainly dragged the greenback downwards on Monday. Adding to the benefits for the pair were China’s strong figures of Industrial Production and Retail Sales. Further, positive sentiment surrounding the US-China trade relations also contributed to limit further losses by the pair.
On the contrary, the Australian government’s downward revision to budget surplus in the mid-year economic forecast suggests weaker growth and slower wages relative to the April budget. As a result, traders remain on the back foot ahead of Thursday’s key employment numbers for November.
Risk tone has been upbeat after the recently agreed trade deal between the US and China. The US 10-year treasury yields surge to 1.87% at the end of Monday’s trading.
For the time being, minutes of the latest Reserve Bank of Australia (RBA) monetary policy meeting will be the key to watch. The recent weakening of the Australian economics might not be revealed from the minute statement but markets will seek clues of further rate cuts.
It should also be noted that there prevails less clarity about how the US and China would go along on the trade path. The same questions the pair’s strength and exert downside pressure. The South China Morning Post (SCMP) conveys that the Chinese business and former trade officials are wary of getting carried away from the phase-one success.
Technical Analysis
Unless breaking 0.6865/60 support confluence, including 10-day Exponential Moving Average (EMA), traders may again aim to clear November highs surrounding 0.6930. In support of this, Monday’s Doji candlestick formation on the daily chart (D1) favors the U-turn of Friday’s declines and further upside.
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