Trading the AUD is made tricky at the moment because there are two different factors weighing heavily on it. Those two factors are the Australian domestic economy and the International negotiations going on with the US-China phase 1 trade deal expected to be announced today.

 

Australian domestic factors

On December 03 the RBA kept rates unchanged as expected, but Governor Lowe indicated the RBA were perhaps happier on the sidelines than the market was expecting. The phrase in focus from the RBA was their hint that the economy was at a ‘gentle turning point’. However, on the next day, the GDP data was a miss at 0.4% vs 0.5% expected. On December 05 retail sales data was another miss at 0.0% vs 0.3% indicating that consumer spending is still under pressure. On December 11, yesterday, the consumer confidence data further undermines the health of the Aussie consumer. The expectations from the investment bank Westpac are now for a RBA rate cut on their February 04 meeting. Domestically the AUD is under pressure. However AUD is rising at the moment due to optimism over the US-China trade deal.

 

International factors with the US-China trade war

The Australian economy receives around 30% of their GDP from China. So, a booming China is great news for the AUD. A positive resolution to the US-China trade dispute will be very supportive for the AUD. Whenever the market is optimistic about a US-China trade deal we see AUD strength and whenever pessimistic we see AUD weakness.

By keeping on top of these two factors we will get a good sense of where the AUD is headed. If, for example, we get a unexpected  breakdown in the US-China trade deal in the next few days I expect that negative sentiment to marry together with the weaker domestic picture and create AUD downside. One great pair for a risk off mood is the AUDJPY pair since the JPY is bought on safe haven flows. The AUDJPY is also good for a risk on move since it gains on global optimism. The AUDJPY has been gaining steadily since the US announced that the December 15 tariffs would be delayed. I am expecing buyers on AUDJPY pullbacks today.

audjpy

 


 

Learn more about HYCM

 

High Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD extends losses toward 1.1250 amid coronavirus concerns

EUR/USD is trading closer to 1.1250 as concerns about US coronavirus cases are growing. Eurozone finance ministers are meeting ahead of next week's summit.  US PPI and updated COVID-19 statistics are awaited.

EUR/USD News

GBP/USD pressured under 1.26 amid risk-off mood, Brexit uncertainty

GBP/USD is trading below 1.26, off the highs. Rising US coronavirus cases are pushing markets lower and the safe-haven dollar higher. Concerns about Brexit and the UK refusal to participate in the EU coronavirus vaccine scheme are weighing on sterling. 

GBP/USD News

Gold refreshes session tops, moves back above $1800 mark

The prevalent risk-off mood assisted gold to reverse an early dip to the $1796 region. A modest pickup in the USD demand might cap any further gains for the commodity. Investors also worried about the possibility of further escalation of Sino-US tensions.

Gold News

Canada Net Change in Employment June Preview: June is looking better and better

Job gains expected to more than double in June. Unemployment rate to drop to 12% from 13.7 in May. Ivey PMI was twice its forecast in June, highest since Nov 2019. USD/CAD would benefit from better June job figures.

Read more

WTI drops to fresh weekly lows below $39 amid virus risks, IEA forecast

WTI (August futures on Nymex) extends the steep declines seen on Thursday to drops over 1.50% in the European session this Friday. The oil bears breach the 39 level to hit the lowest levels in eight days at 38.76.

Oil News

Forex Majors

Cryptocurrencies

Signatures