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  • AUD/USD struggled between recovery in the market’s risk tone and strong greenback the previous day.
  • Receding trade tension triggered risk-on, sluggish data from Australia exerted downside pressure.
  • July month Private Sector Credit, Building Permits and HIA New Home Sales from Australia will provide fresh direction.

AUD/USD refrains from its consecutive three-days of declines while taking rounds to 0.6730 during early Friday morning in Asia as traders await details of second-tier Australia data amid the recent recovery in the US-China trade sentiment.

Although disappointing details of the second quarter (Q2) Private Capital Expenditure from Australia and negative headlines concerning the US-China relations, be it trade or political, exerted downside pressure on the Aussie during initial Thursday, the quote avoided a slump as China stepped back from its latest retaliation against the US tariff hike that was supposed to go live on September 01.

Risk tone recovered on the back of trade-positive news with the US 10-year treasury yields near 1.50% with two basis points of gain at the end of Thursday’s round.

However, tension surrounding the South China Sea and Hong Kong still prevails while latest step-back from China can still be costlier for the US goods as China’s Customs Tariff Commission of the State Council  recently said that imports from the United States (US) that appear more than once on China’s tariff hike lists will be subject to the combined tariff rates.

Given the absence of fresh trade/political headlines during early Asian markets, traders brace for Australia’s July month Private Sector Credit, Building Permits and HIA New Home Sales data for fresh impulse.

TD Securities expects downbeat releases from Australia as it says, “We pencil in a 1% m/m drop in building approvals in July, but this does little to change the trend, keeping approvals well below levels seen over the past couple of years. Recent policy easing suggests there should be a pick up in approvals, but the process is likely to be gradual. Private sector credit growth is expected to have risen 0.2% m/m, taking annual growth to 3.2%. In terms of composition, Housing credit should drive the pick up as cash rate easing should support the gradual recovery in the housing market. However, Business credit has been soft for 3 consecutive months now and personal credit growth is decelerating.”

Technical Analysis

A three-week-old symmetrical triangle formation between 0.6780 and 0.6690 can keep prices in check with a monthly low near 0.6677 and 21-day exponential moving average (EMA) around 0.6782 being additional filters to watch.