AUD/USD slips back to sub-0.6900 area amid mixed trade/political sentiments

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  • AUD/USD begins the week by consolidating Friday’s recovery gains.
  • Upbeat headlines concerning the US-China trade relations confront fresh geopolitical risk emanating from Iran.
  • The absence of major data/events will keep trade/political news on the driver’s seat.

AUD/USD declines from the previous week’s close to 0.6897 as the Asian market open for trading on Monday. The Aussie pair benefited from upbeat Australian economics, a contrast to the US data, as well as recovery in the market’s risk tone on Friday. However, recent news of Iran’s attack in Iraq base hosting US troops exert downside pressure on the pair off-late. Even so, trade-positive statements from the US diplomats keep the risk tone lesser affected. Market players will witness silence on the economic calendar, which in turn pushes them towards trade/political headlines for fresh impulse.

Read: What you need to know for the open: Positive noises on trade to counter Persian Gulf conflict risks

With a multi-month high Aussie Retail Sales for November getting the back-up of weaker than expected US Nonfarm Payrolls (NFP), investors bought the AUD/USD pair on Friday. While Australia’s Retail Sales crossed a 0.4% upbeat forecast to 0.9%, the US NFP slipped below 164K expected to 145K in December. Additionally, the US Average Hourly Earnings declined to 2.9% from 3.1% forecast and prior.

Other than the data, recovery in the market’s risk tone also seemed to have played its role in propelling the Aussie on Friday. The US-Iran war is likely averted, for now, as neither the US nor Iran undertook any major actions recently, except for few small missile attacks by Iran on the US military bases in Iraq. Recent news confirms another such incident wherein Tehran fired shots in Balad air base north of Baghdad. The Arabian nation also arrested the UK ambassador to Tehran and invited resentment from the UK and the EU leaders, mainly Germany and France.

Considering the trade headlines, White House (WH) Economic Advisor, Larry Kudlow, said that everything is in place on the China trade deal. The US Treasury Secretary Steve Mnuchin also crossed wires and said that there will be talks on the phase-two of the US-China trade deal when the Chinese delegates arrive on January 15. Further, the US is also expected to move forward on its trade negotiations with the EU, as said the WH Advisor Kudlow.

Given the on-going US-Iran noise, the market’s risk tone stays under pressure despite trade optimism concerning the US-China and the upcoming US-EU talks. Investors will have to keep eyes on these issues for fresh direction. However, the Aussie may consolidate some more of its gains unless witnessing any strong outcome from TD Securities Inflation for December, prior 1.5% YoY and 0.0% MoM.

Technical Analysis

While 200 and 50-day SMAs limit the pair’s short-term declines around 0.6890 and 0.6870 respectively, buyers will look for entry beyond November month top surrounding 0.6930.

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