AUD/USD rebounds to 0.70 area on slight trade optimism

• U.S. Pres. Trump says it’s possible to get a trade deal with China this week.
• 10-year T-bond yield and Wall Street pulls away from daily lows.
• US Dollar Index stays below 97.50.  

The AUD/USD pair slumped to 0.6960 area on Thursday and spent the majority of the day in a tight channel in the lower half of its daily trading range. However, with the latest comments from U.S. President Donald Trump reviving hopes of the U.S. and China reaching a trade deal before the U.S. hikes the tariff rate on Chinese imports to 25% to possibly trigger a similar reaction from China and intensify the trade conflict. As of writing, the pair was up 0.12% on the day at 0.6996.

While speaking to reporters ahead of today’s high-level trade negotiation, which is scheduled to start at 21 GMT, Trump said that he received a letter from his counterpart Xi that had an “excellent alternative” to the trade deal and added that it was still possible to reach an agreement this week.

The market reaction to Trump’s remarks allowed major equity indexes in the U.S. and the 10-year T-bond yield rebound from their daily lows to reflect slightly improved market sentiment, which also helped the antipodeans such as the AUD find demand.

On the other hand, the greenback struggles to recover its losses and makes it easy for the pair to cling to its gains. At the moment, the US Dollar Index is down 0.22% on the day at 97.38.

On Friday, the RBA will be publishing its statement on the monetary policy. Later in the day, the inflation report from the U.S. will be looked upon fresh impetus. Previewing this data, “This week’s intense focus on US/China trade discussions pulls attention away from traditional macro drivers. That said, we think the USD may be marginally more sensitive to an unexpectedly weak CPI than a stronger one,” said TD Securities analysts.

Technical levels to watch