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  • AUD/USD is currently trading at 0.6989, on the backfoot in risk-off start to the week, down from a high of 0.7004.
  • Optimistic trade headlines have morphed into pessimism over the weekend, weighing on risk appetite at the start to the week.  

On Friday, we had a rather muted reaction to the Trump administration’s hike in tariffs from 10% to 25% on USD200bn of Chinese imports, nor did key forecasts in the RBA Statement on Monetary Policy that were already known. AUD/USD moved a little higher as a result from 0.6985 to a high of 0.7019 although there was some weakness again into the 0.6990 area as markets positioned ahead for possible retaliation headlines from China. At the start of the week, AUD/USD is en route for a test of the European lows of last week down at 0.6985 as weekend news paints a very different picture from what we got in trade talk comments at the end of discussions on Friday between top negotiators from both the U.S. and China:

  • Beijing vows retaliation on US trade – People’s Daily

  • China will never concede on `issues of principle’ – Global Times / Trump: We are right where we want to be with China

  • Trump-Xi trade talks likely at G20 summit, says U.S. – FT

“We are expecting soft risk appetite to continue alongside choppiness today as the market recalibrates trade expectations,”

analysts at ANZ Bank Australia explained.  

Looking ahead, “Australia’s official data this week is very important for the RBA, including Q1 wages on Wed and Apr labour force Thu. Today we see Mar housing finance approvals. The number of owner-occupier approvals is seen declining -0.5% (Westpac -1.0%),” analysts at Westpac explained.  

AUD/USD levels

Technically, and according to the daily chart, Valeria Bednarik, Chief Analyst at FXStreet, argues that the bearish case remains firmly in place:

“The 20 DMA accelerated south below the larger ones, all of them well above the current level, maintaining downward slopes. Technical indicators in the mentioned chart lack directional strength, but remain well into negative ground, consolidating near their weekly lows. Shorter term, and according to the 4 hours chart, the pair offers a neutral-to-bearish stance, seesawing around a flat 20 SMA and far below bearish larger ones, and with technical indicators heading nowhere around their midlines.  The pair has a double bottom in the 0.6960 price zone, with a break below it anticipating a decline below the 0.6900 level in the upcoming sessions.”