AUD/USD rises as US-China trade war fears recede
Fawad Razaqzada May 21, 2018 5:23 PM
The Australian dollar has been among the strongest of currencies out there today, helped along by a rally in base metal prices.
The Australian dollar has been among the strongest of currencies out there today, helped along by a rally in base metal prices. The commodity currency rose in what started out to be a "risk on" day for the markets with global stock indices rising sharply after the US and China backed down from a full-on trade war at the weekend. With China being Australia’s largest trading partner, any positive development for the world’s second largest economy is thus positive for Australia’s export. However, the Italian stock and bond market sell-off held back risk sensitive assets a little, although it wasn’t enough to stop the UK’s FTSE 100 from hitting new all-time highs today. But in the US, the stock markets couldn’t sustain the early rally although the indices were still in the positive territory at the time of writing. Meanwhile the US dollar gave back its earlier gains as the slight risk-off tone in the second half of today’s session supported the likes of the euro, Swiss franc and Japanese yen. Even gold managed to catch a small bid.
As a result of a slightly soft US dollar and strong Australian dollar, the AUD/USD was able to climb back to 0.7560 resistance, where it was trading at the time of this writing. This currency pair may have already formed a false break reversal pattern given that the sellers have struggled to hold it below the key 0.75 handle after several attempts. As well as a psychologically-important level, this level marks the previous swing low from December. Consequently, the AUD/USD has not only turned positive on the day and week, but it has done so on the monthly time frame as well (see the inset). Now that the AUD/USD is above the monthly opening price and around a technically important level, we may get some range expansion to the upside, particularly if short-term resistance at 0.7560 breaks and price holds above it. If so, there’s not much further resistance seen until the point of origin of the last breakdown at 0.7655, a level which may now turn into resistance. This bullish outlook will probably become invalid in the event the AUD/USD now goes back below 0.7500 on a daily closing basis. If that were to happen, then one has to question the validity of that false breakdown pattern.
Source: eSignal and FOREX.com.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.