- AUD/USD holds onto the previous day’s recovery gains beyond 0.6450.
- Expectations of further stimulus, Wall Street gains favor antipodeans.
- Trade war, virus wave 2.0 cap the rise.
- China Industrial Production, Retail Sales can offer immediate direction while trade/virus headlines remain as the key.
AUD/USD rises to an intraday high of 0.6474 amid the initial Asian session on Friday. The pair recently benefited from the odds favoring further stimulus from the US. However, US-China tension and broad US dollar strength seem to cap the pair’s further upside. Also likely to chain the bulls could be the upcoming April month Industrial Production and Retail Sales data from China.
Risk-on or risk reset?
With the CNBC sources saying that the White House would likely support a new round of stimulus checks, the market’s risk-tone sentiment escalates the late-US session recoveries. Also favoring the odds of another round of stimulus from the US could be comments from the Dallas Fed President Robert Kaplan and US Senate Majority Leader McConnell.
Even so, the risks of the deterioration in the US-China relations continue to cap the immediate optimism. The US Senate recently passed a bill that enables the Trump administration to levy sanctions on Chinese officials involved in the Xinjiang case. Additionally, a separate Republican bill is in the pipeline that will enable President Trump to sanction China if it doesn’t cooperate in the virus outbreak investigation.
That said, US 10-year Treasury yields register 0.4 basis points (bps) of gains to 0.623% whereas S&P 500 Futures also benefit from the risk-on sentiment and rise 0.13% to 2,851 by the press time.
While the current optimism is likely to keep the Aussie pair lighter, economics from the largest customer China will be closely watched for immediate direction. Among them, Industrial Production may recover from -1.1% to +1.5% while Retail Sales could drop 7.0% contraction versus -15.8% prior.
Technical analysis
A confluence of 21-day SMA and an 18-day-old rising trend line, near 0.6440 now, offers immediate support to the pair ahead of the monthly low near 0.6380. On the contrary, a weekly resistance line near 0.6490 guards nearby recoveries ahead of the May 11 high of 0.6562.
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