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  • China says financial risks are controllable.
  • US Dollar Index recovers small part of last week’s losses.

The AUD/USD dropped to its lowest level since early January last week but staged a modest rebound to close the week virtually unchanged. With the trading volume thinning out due to the holiday in the U.S., the pair is moving up and down in an extremely tight channel today, waiting for the next catalyst. Meanwhile, investors don’t seem to be paying any attention to antipodeans  and focusing on the EU elections in the absence of any other macroeconomic data releases or events.  

Earlier today,  Guo Shuqing, China’s banking and insurance regulator chief, argued that the escalation of trade frictions will have limited impact on China’s financial markets but was largely ignored by the markets.  Shuqing also reiterated that financial risks were controllable.

Meanwhile, following the selloff witnessed on Thursday and Friday, the US Dollar Index is posting technical recovery gains near 97.70, failing to provide a directional clue to the pair. In the second half of the day, the trading volume is likely to thin out event further due to the Memorial Day holiday in the U.S.

Tomorrow’s housing market and consumer sentiment data from the U.S. will be looked upon for fresh impetus. The next data from Australia, new home sales, will be released on Wednesday.

Technical levels to watch for