- Renewed US-China trade optimism underpinned the China-proxy aussie.
- The USD remained well supported by Friday’s mostly upbeat US data.
- Sustained move beyond 0.6800 handle needed to confirm further gains.
The AUD/USD pair held on to its mildly positive tone through the early European session on Monday, albeit seemed struggling to extend the momentum further beyond the 0.6800 handle.
The pair managed to gain some positive traction on the first day of a new trading week and recovered from over one-week lows set on Friday amid a flurry of positive trade-related headlines, which provided a modest lift to the China-proxy Australian dollar.
Focus remains on trade developments
The US President Donald Trump on Friday said that a deal with China was “potentially very close,” and also indicated that he might not sign a bill passed by Congress that supports Hong Kong, which had emerged as a fresh complication in the trade talks.
Adding to this, Chinese President Xi Jinping also said Friday that he wants to reach an agreement and the US National Security Adviser Robert O’Brien on Saturday further revived hopes of a possible deal by the end of this year, which was enough to lift the broader market risk sentiment.
The risk-on mood war further reinforced by a modest pickup in the US Treasury bond yields. This coupled with Friday’s mostly upbeat US economic data continued underpinning the US dollar and might turn out to be the only factor that might keep a lid on any strong gains.
Hence, it will be prudent to wait for some strong follow-through buying before confirming that that pair might have bottomed out in the near-term and positioning for any further near-term appreciating move amid absent relevant market-moving US macro releases on Monday.
Technical levels to watch
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