AUD/USD Ignores Trade Balance in Favor of US Data, Trade War News


TALKING POINTS – AUD/USD, RBA, ASX 200, TRADE WARS

  • AUD/USD reversed a slight rally following the release of higher trade balance
  • Despite improving economic activity, RBA unlikely to consider a rate change soon
  • August’s US Data, equities, and US-China tariffs in the spotlight next

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The Australian Dollar pared slight gains against its US namesake after local economic data crossed the wires early into Thursday’s Asia Pacific trading session. July’s trade balance clocked in at A$1551m, up from economists’ forecasts of A$1450m and June’s A$1873m. Last month’s exports fell 1% from the previous, while imports were little changed. This continues the trend of better-than-expected economic activity from the nation, as 2Q GDP beat both the estimated 2.8% and prior 3.2%, coming in at 3.4% earlier this week. However, despite this improvement, AUD/USD has remained in a downtrend channel for the majority of this year. Currently, the currency pair is testing May and December 2016’s support levels at the 0.716 range. Traders should look for reversal signs, especially if AUD/USD breaches this low.

AUD/USD Chart (5-minute)

AUD/USD Ignores Trade Balance in Favor of US Data, Trade War News

Chart prepared in TradingView

AUD/USD Chart (Daily)

AUD/USD Ignores Trade Balance in Favor of US Data, Trade War News

The slight rally may soon face a reversal, however, as the improvement in economic activity is unlikely to influence monetary policy bets in the near-term. The Reserve Bank of Australia maintained its record-low OCR at 1.50% at its recent September 4th meeting, sticking to its wait-and-see approach in response to low inflation. Overnight index swaps do not price at a better-than-event chance of an RBA rate hike in the near future. On the other hand, an increasingly hawkish Federal Reserve may cause the pair to continue its descent.

Looking forward, this week sees the release of high-importance economic data. AUD/USD traders should watch August’s unemployment rate, change in non-farm payrolls, and ISM non-manufacturing/services composite, all of which may induce volatility for the US Dollar. Furthermore, the pro-risk Aussie Dollar will be closely eyeing markets. The ASX 200’s losses, in addition to the S&P 500 and NASDAQ’s weak performance earlier today may weigh down AUD. The Australian Dollar will also be looking to trade war developments, specifically the proposed $200B in US tariffs on Chinese imports.

AUD/USD Trading Resources

— Written by Megha Torpunuri, DailyFX Research Team



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