AUD/USD boosted by hopes for better Aussie/Sino trade relations

AUD/USD trades higher by around 30 pips or up around 0.4% as markets head towards the Friday close, with the pair crossing above the 0.7250 mark in recent trade.

AUD outperforming its kiwi counterpart amid hopes for improved Aussie/Chinese trade relations

AUD is the third-best performing G10 currency today, trailing only GBP and JPY. Conversely, NZD is currently sat in third from bottom in the G10 performance table, with NZD/USD marginally lower on the day.

Supporting AUD vs both its US and New Zealand dollar counterparts were comments from the Australian Deputy Foreign Affairs and Trade Secretary during the Friday Asia session; Christopher Langman, speaking at the Caixin Summit event in Beijing, said that disruptive trade conditions between Australia and China will be resolved and Beijing will resolve “technical” matters as soon as possible.

Note that just last week, Australian media reported that Chinese importers had apparently received informal warnings from customs officials that commodities including copper ore, barley, sugar, timber and lobster are set to face increased inspections going forward. Commentators view China’s recent moves against Australian imports as retaliation for increasingly “anti-China” rhetoric coming out of Australia, including insistence by the Australian government that there should be a global inquiry into the origins of the Covid-19 pandemic. So whether or not Langman’s comments are a signal of better relations to come remains to be seen.

AUD/USD eyes a retest of prior uptrend

AUD/USD has recovered nicely from weekly lows set on Thursday of around 0.7220. The pair is thus now eyeing a retest of an uptrend that it broke below on Thursday that links the 3 November high and the 6, 10 and 11 November lows, which ought to come into play before 0.7300.

To the downside, most immediately, there is the 23.6% Fibonacci retracement between the November low (at roughly 0.7000) and high (at roughly 0.7340), which comes into play just below current levels of 0.7260.

However, this level did not offer much resistance on Friday and so is likely to not provide much support either. Better areas of support to note are the weekly low around 0.7220 and the 38.2% fib retracement from the November high to low at just above the psychological 0.7200 level.