AUD/USD pulls back from 5-week high as trade optimism fades

• AUD/USD refrains from crossing a month’s high as updates from China don’t confirm recent trade optimism.
• Traders also remain on the sideline ahead of the key NFP, Fed Chair’s speech.

AUD/USD becomes another commodity-linked currency holding back its recent rises, amid doubts over the US-China trade optimism, as it makes the rounds to 0.6815 during early Friday morning in Asia.

On Thursday, the Aussie pair shrugged off lesser than expected July month trade balance data and a call for the Reserve Bank of Australia’s (RBA) October rate cut from the Australia and New Zealand Banking Group (ANZ). The reason was statements from China’s Commerce Ministry showing renewed trade optimism between the US and the dragon nation signaling a negotiation round during October.

The trade-positive news propelled the market’s risk sentiment with notable recovery in the global bond yields and equities by the end of the previous day.

Even so, Chinese media, including the South China Morning Post (SCMP), raised doubts of any breakthrough from the talks considering the US attitude. Following that, harsh comments against the US from China’s Ambassador to Australia Cheng Jingye also challenged the recent trade-positive feel.

Recently released numbers of August month AiG Performance of Construction Index from Australia couldn’t defy the Aussie pair’s weakenss even after rising past 39.1 prior to 44.6.

On a bit distant note, investors are taking a cautious view ahead of today’s key US Nonfarm Payrolls (NFP) data after the ADP Employment Change flashed upbeat results on Thursday. Adding to the day’s importance is a speech by the US Federal Reserve Chairman Jerome Powell at an event hosted by the Swiss Institute of International Studies, in Zurich.

While the NFP is expected to soften to 158K from 164K, coupled with no anticipated change in 3.7% Unemployment rate and 0.3% Average Hourly Earnings, Fed Chair’s speech titled “Economic Outlook and Monetary Policy” will be closely followed for a fresh impulse of the US Fed’s next move.

Technical Analysis

21-day EMA, at 0.6785, acts as immediate support ahead of 0.6735/30 area whereas 50-day exponential moving average (EMA) around 0.6840 holds the key to pair’s further rise towards 0.6900/10 area including 100-day EMA and July 30 high.