- An escalation in the trade conflict between the US and China saw a wave of selling hit the commodity markets, while the CNY took down EM-FX and the Aussie was weighed down by it all.
- AUD/USD is currently trading at 0.6944, between an early Asian range of 0.6940 and 0.6945, licking its wounds having fallen from a touch above 0.70 the figure.
AUD/USD remains mutilated from the series of negative events that rippled through risk assets such as commodities following a plea of retaliation from the Chinese in response to the recent hike of tariffs from the U.S. in Chinese imports. Fears over a protracted global downturn intensified overnight and are likely to reverberate around Asia today unless something comes out to the contrary.
China said it would impose higher tariffs on most US imports on a USD60bn target list, hitting back at the US tariff hike, analysts at ANZ Bank noted, adding:
“A total of 5,140 US products will be subject to additional tariffs, ranging from 5-25% starting 1 June, an escalation from rates of 5% and 10%. President Trump indicated he would speak with China’s Xi during the G-20 and Treasury Secretary Mnuchin said that US-China trade talks are ongoing, which helped to relieve some pressure on risk assets. Additional US tariffs on all remaining Chinese imports, which would affect an additional USD300bn worth of goods, have not been decided on yet.”
It was a textbook play in markets, with the usual subjects being sold, such as the Aussie, while industrials and agriculture were the worst hit in the commodity sector and not even oil was spared despite the escalating geopolitical tensions surrounding Iran. A slump in stocks helped Gold and other precious metals in the commodities sector -gold, seeing a flight to safe-haven, rose 1.1%.
AUD/USD levels
Valeria Bednarik, the Chief Analyst at FXStreet, explained that from a technical point of view, the pair is giving no signs of changing course in the near term:
“In the 4 hours chart, it fell further below its 20 SMA after failing to break above it, while the 100 and 200 SMA remain well above the shorter one, accelerating their declines. In the mentioned chart, the Momentum indicator hovers within negative territory while the RSI bounced modestly from oversold readings, rather following price action than anticipating further gains ahead.”
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