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The AUD/USD pair has traded at its highest levels since early March this week. However, this week’s AUD gains come at a time when a souring in the relationship between the US and China is leading to concerns about the growth outlook in the world’s second-largest economy and Australia’s biggest export partner, per Rabobank.

Key quotes

“Insofar as US suspicions of China extend on both sides of Washington’s political divide, tensions between the US and China are likely to last well beyond the US election irrespective of the outcome.  This could pose difficulties for Australia.”

“If coal or iron ore, Australia’s biggest export goods, were considered to be the subjects of Chinese retaliation, the risk to the country’s economy and to the AUD would be accentuated.”

“We would expect the AUD/USD 0.66 area to act as psychological resistance and look for AUD/USD to turn lower on a 1 to 3-month view.”   

“In the approach to the US November Presidential election, we see of another dip towards the AUD/USD 0.60 area.”