AUD/USD boosted on fickle trade sentiment, failing at key resistance target ahead of NFPs

• AUD/USD  commenced its recovery following good enough economic data and trade deal hopes.
• Next major risk before the weekend will come in the form of US data.
• Rallies will need to regain the 0.6832 June low as an absolute minimum.

AUD/USD is currently trading at 0.6817, up from a low of 0.6793, higher by 0.30% and onward to 0.6820 the high.  There was some short covering taking place following the Hong Kong news yesterday’s which extended overnight in Asia on the back of trade balance data that showed another solid surplus.

Today, risk sentiment is on after the announcements overnight in Tokyo trade that the US and China are seeking a meeting in October to discuss trade.  The Aussie commenced its recovery following good enough Gross Domestic Produce and a steady hand from the Reserve Bank of Australia. When factoring in prospects of a trade deal between the US and China and an unwind of the Dollar which has picked up a safe-haven bid in recent times, AUD/USD can continue to recover.

Hold on there a minute…

However, not so many observers are convinced that the trade talks next month will lead anywhere and the market could be setting itself for further disappointment – Afterall, the RBA regard  the “trade and technology disputes”  as a major headwind.

“When the RBA repeats that it is prepared to “ease monetary policy further if needed”, it is surely just a question of exactly when the next rate cut is delivered,” analysts at Westpac explained – “Our base case remains Oct but we can see why pricing is 50/50 for Oct and 100% by Nov.”

Looking ahead, the next major risk before the weekend will come in the form of US data. “Though we look for a more moderate outcome vs. consensus, ADP introduces some upside risk to our forecast. Taken in conjunction with a better ISM services report has us looking at a flat to firmer USD,” analysts at TD Securities argued – Nonfarm Payrolls are expected to be 158k vs 164k last.  

AUD/USD levels

“Rallies will need to regain the 0.6832 June low as an absolute minimum in order to alleviate immediate downside pressure,” analysts at Commerzbank stated.