AUD/USD analysis: US-China tensions undermine Aussie

Valeria Bednarik FXStreet

AUD/USD Current price: 0.7104

Escalating trade war sent AUD/USD to its lowest since February 2016.
Chinese trade balance released over the weekend could weigh on the weekly opening.

The AUD/USD pair collapsed Friday to close the week at 0.7104, its lowest since February 2016, as the Aussie is sensitive to China-negative headlines, given that the second world's largest economy is the major trade partner of the mining-based economy. Dollar's broad strength and falling equities, added to Aussie's slump after US President Trump told reporters that his administration is ready to impose new tariffs on $267 billion worth of Chinese goods in addition to the planned $200 billion. News released during the weekend did little for the AUD, as Chinese trade balance showed that the surplus of the country with the US hit a record high of $31.05B in August, up from $28.09B n July. The total trade balance in dollar terms posted a below-expected surplus of $27.9B. Exports grew 9.8% vs. the expected 10.1%, while imports in the same period surpassed market's estimates, printing 20%. This Monday, attention will remain on China, as the country will unveil August inflation data. RBA Assistant Governor Bullock is set to speak at an Australian Industry Group event, about "The Evolution of Household Sector Risks."

Despite extremely oversold, there are no technical signs that the pair has found a bottom. The bearish momentum remains firmly in place, with speculative interest now eyeing January 2016 low, at 0.6826 as the next big bearish target. In the meantime, technical readings in the daily chart support a downward extension for this Monday, as indicators approach oversold readings with almost vertical slopes, as the price continues declining away from sharply bearish moving averages. In the shorter term, and according to the 4 hours chart, the risk is also skewed to the downside, as the pair finished well below its 20 SMA after struggling mid-week to surpass it, while technical indicators maintain their sharp downward slopes well into negative territory.

Support levels: 0.7095 0.7065 0.7030

Resistance levels: 0.7140 0.7180 0.7210

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.

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