AUD/USD analysis: US-China tensions spooked Aussie bulls

Valeria Bednarik FXStreet

AUD/USD Current price: 0.7228

Australian trade surplus shrunk to 2,316M in October amid large imports of capital goods.
AUD/USD trading near a fresh 3-week low of 0.7191, at risk of falling further.

The AUD/USD pair fell to a 3-week low of 0.7191, immune to soft US data, which only brought some temporal relief, and strongly pressured by the sour tone of worldwide equities. Fears that the US and China won't come to an agreement about their trade relationship after the arrest of a Huawei executive dominated equities' markets, spurring demand for safety and sending government bond yields sharply down. The dollar came under pressure with such headlines, but not against its commodity-linked rivals, with the Aussie particularly hurt by fears of an economic slowdown in China and the CAD by falling oil prices, as an OPEC output cut remains unclear. Australian data released at the beginning of the day didn't help, as despite retail sales were up by 0.3% in October, the trade balance surplus for the same month was of 2,316M, well below the market's forecast. The country will release this Friday the AIG Performance of Construction index for November, previously at 46.4.

The 4 hours chart for the pair shows that it's battling with its 200 SMA after breaking below the 20 and 100 SMA, as technical indicators hold within oversold territory, with no signs of changing course. The pair turned bearish after breaking below the 0.7250 level and will remain so as long as below it. A strong support area comes around 0.7175, the level to breach for a steeper decline ahead. Above the mentioned 0.7250 level the pair could recover up to 0.7300, but gains below this last seem now unlikely during the upcoming sessions.

Support levels: 0.7210 0.7175 0.7140

Resistance levels: 0.7250 0.7300 0.7340

View Live Chart for the AUD/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates

Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold: Volatility persists in commodity space

After losing more than 8% to end the previous week, Gold remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls and Consumer Price Index data for January, which could influence the market pricing of the Federal Reserve’s policy outlook and impact Gold’s performance.

Week ahead: US NFP and CPI data to shake Fed cut bets, Japan election looms

US NFP and CPI data awaited after Warsh’s nomination as Fed chief. Yen traders lock gaze on Sunday’s snap election. UK and Eurozone Q4 GDP data also on the agenda. China CPI and PPI could reveal more weakness in domestic demand.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.