- AUD/USD has been under pressure but has pared back a portion of the trade war losses and continues to inch higher in North America.
- AUD/USD is currently trading at 0.6995, between a range of 0.6963 and 0.7022.
AUD/USD dropped below 0.70 the figure like a knife through butter in early Asia yesterday at the open following the market’s reaction to Trump’s weekend trade war tweet reported on here:
Breaking: Trump’s threat to lift tariffs on Chinese imports sends risk assets into reverse, Yen is 0.34% higher vs dollar
A low of 0.6963 was made before bulls picked up a scalping opportunity based on beliefs that a deal will indeed be secured between the U.S. and China. In fact, despite headlines circulating that Chinese delegates would not attend trade talks in Washington this week, the South China Morning Post is reporting that China still plans to move forward with talks: Update to trade wars: China still plans to move forward with talks – South China Morning Post
Meanwhile, on a quiet U.S. calendar, today will turn to today’s Asian session where not only will we see Aussie retail sales, but the RBA will meet later in the day. Some observers are looking for a rate cut, but a dovish rare cut could really play havoc on the Aussie.
For instance, TD Securities looks for a 25bps cut, but said it is far from a done deal:
“OIS is 42% priced for -25bp while the median is 1.25% (barely, at 14/26). The decent Q1 core CPI miss & consecutive soft GDP prints suggest the RBA need not wait for a trend pickup in unemployment in order to cut tomorrow. A range of options for RBA forward guidance is listed below. The market could see a dovish cut if more cuts lie ahead via significant downgrades to GDP/CPI forecasts (confirmed in Friday’s SoMP). We look for -0.5pp for GDP & -0.3ppt for core CPI in 2019. We expect an explicit easing bias if the RBA keeps rates on hold. OIS is then likely to price the next cut in August if the RBA focuses on weaker inflation.”
AUD/USD levels
Analysts at Commerzbank explained that AUD/USD has eroded 0.7000, and came very close to our target -the 0.6950 61.8% retracement, where we suspect that the market will then stabilise:
“Below 0.6950 there is scope for the 0.6857/78.6% retracement. Rallies will now find initial resistance offered by the 55-day ma at 0.7098 and will need to regain this for a viable shot at the 0.7207 February high. Price action in January was exhaustive – the market charted a hammer (reversal). This suggests the down move ended at 0.6738.”
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