- AUD/USD portrays risk-aversion amid trade/political tension.
- Catalysts concerning the US-China trade relations flash mixed signals, Saudi Arabia warns Iran of a war if it attacks the nation.
- Australia’s activity numbers grab immediate market attention.
Despite recent U-turn in the US-China trade saga, the AUD/USD pair remains under pressure around two-week low as it trades near 0.6770 during the early Asian session on Monday.
AUD/USD, which is generally considered as a barometer of market’s risk sentiment, recently dropped to early-month lows after the US-China trade relations recently tweaked following the Chinese delegate’s cancellation of the US farm visit and early exit to the dragon nation, coupled with the US President Donald Trump’s pressure for a full deal.
Adding to the risk aversion wave was the Yemeni rebel warning that Iran is preparing for another attack on Saudi Arabia. In response, the Saudi Arabian Foreign Minister warned Iran of risking a war while the US deployed additional forces in the Middle East terming it as a “defensive in nature”.
There has been some noticeable change in both the trade/political headlines off-late as the Wall Street Journal quotes Houthi leader turning down claims of any such warnings of an attack on Saudi Arabia while the New York Times and China’s Xinhua trying to tame the trade-war fears.
Recently released quarterly statement from the Australian Council Of Financial Regulators says that the major banks have seen slower growth relative to other lenders.
With this, equities, bond yields, and the Aussie pair are under pressure while safe-havens like the Japanese Yen (JPY) and Gold benefit from the risk-off mood.
Investors will now keep an eye over September month readings of Commonwealth Bank’s Manufacturing, Services and Composite Purchasing Managers’ Indices (PMIs). Forecasts suggest the headlines Manufacturing PMI to remain unchanged at 50.9 with its Services counterpart likely weakening to 45.3 from 49.1 earlier. It should be noted that the Composite PMI registered 49.3 mark earlier.
Following that, the US is also up for releasing preliminary activity numbers for September wherein a likely improvement in the Markit Services PMI will confront the market consensus of a below-50 level of Composite PMI.
Technical Analysis
While 0.6740 and 0.6700 can be considered as immediate downside support ahead of anticipating further south-run towards yearly bottom surrounding 0.6675, an upside clearance of 21-day exponential moving average (EMA) level of 0.6810 could trigger fresh recovery in the direction to 0.6850 that nears multiple lows marked in the second week of the month.
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