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  • AUD/USD extends gains as officials from the US and China hold trade talks over the phone. 
  • Sustained risk-on looks likely and help the AUD post a convincing move above the key hurdle. 

The already bid AUD is extending gains against its US counterpart on news that the US and Chinese officials held trade talks over a phone call. 

Trade tensions ease

AUD/USD pair crossed above the 100-day average at 0.6535 and printed a session high of 0.6546 after news of US-China trade talks hit the wires. Both sides agreed to implement phase-1 of the trade deal signed in December and keep communication lines open, according to Xinhua News. 

Tensions between the two nations escalated earlier this week with the US authorities accusing China of spreading the coronavirus and President Trump threatening to levy punitive tariffs on imports from China. 

Risk-on

Reports stating that the US and Chinese diplomats are planning to re-establish trade-talks beginning next week hit the wires in early Asia, restoring the risk sentiment and putting a bid under the AUD/USD when it was trading around 0.6490.

The risk sentiment further strengthened with news that Saudi Arabia would be raising oil prices to stabilize the oil market. 

The Reserve Bank of Australia’s Quarterly Statement of Monetary Policy did bring in bad news in the form of a dismal 2020 GDP forecasts. Markets, however, were prepared for the same as Governor Lowe recently talked about a rise in the jobless rate to 10% by June and a 10% drop in the output in the second quarter. As a result, the AUD/USD pair managed to keep gains. 

Looking forward, the pair looks set for a convincing break above the 100-day average, as trade talks are likely to keep risk assets better bid while heading into the weekend. The US Nonfarm payrolls are expected to show the biggest monthly decline in jobs on record. That, however, may end up bolstering expectations for negative rates in the US, sending the greenback lower across the board. 

At press time, the AUD/USD pair is trading near 0.6545, representing a 0.77% gain on the day.

Technical levels