AUD/USD, Australian Dollar Analysis and Talking Points

  • Modest Outperformance within the Australian Dollar
  • Focus on RBA Hike and Possible China Tariff Announcement

RBA to Hike Another 50bps

Modest outperformance within the Australian Dollar this morning, nonetheless, that is merely a restoration from Friday’s heavy losses with AUD/USD up 0.6% to 0.6850. Looking forward, the RBA is anticipated to boost the money fee by one other 50bps, which is barely greater than cash market pricing of 40bps. In flip, a 50bps hike is prone to immediate a kneejerk transfer greater within the Australian Dollar.

US-China Trade War Review

Elsewhere, as this month marks 4 years for the reason that starting of the US-China commerce warfare, focus can even be on commerce coverage amid the US Treasury’s July 5th deadline assessment of US tariffs on USD 34bln value of China imports. This might present a optimistic catalyst for the Chinese Yuan and by extension, the Australian Dollar (a China proxy) ought to the US determine to rescind some tariffs on Chinese items. One of the motivations that US Treasury Secretary Yellen famous behind decreasing tariffs was that it could actually ease the burden on American shoppers and companies which have needed to pay for the tariffs. In flip, given the present backdrop of multi-decade excessive inflation that has squeezed incomes, this has prompted extra scrutiny on Trump-era Chinese tariffs, notably with the US mid-terms only some months away.

That mentioned, there have been some divisions inside Biden’s administration with the President’s Trade Chief stating that China tariffs present the US with important leverage, including that eradicating tariffs would do little for inflation within the short-run. Now whereas the feedback from the President’s Trade Chief may be true, ought to we see experiences that some China tariffs will probably be eliminated, I might anticipate to see the Australian Dollar transfer greater, whereas bond yields proceed to increase decrease.

AUD Levels to Watch

Idiosyncratic components are prone to have a short-term impact on the Australian Dollar. Overall, basic risk-on/risk-off sentiment is prone to dictate the fortunes of the foreign money. Topside resistance is located at 0.6850-60, above which the 0.6900 psychological stage is one to look at. Meanwhile, assist is located on the YTD low (0.6762).

A Helpful Guide to Support and Resistance Trading

Chart in Focus: Germany Posts First Trade Deficit Since 1991

Source: Refinitiv

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