AUD/USD consolidates recent gains to 0.6850, eyes on Aussie trade balance, retail sales

• AUD/USD retraces from a multi-week high.
• A shift in risk sentiment, disappointing data from the US helped recover losses from Aussie GDP.
• Fresh trade headlines will be taken with a pinch of salt coupled with data from Australia and the US.

AUD/USD declines to 0.6848 by the press time of early Thursday morning in Asia. The pair fails to extend the previous day’s recovery while taking rounds to the multi-week top marked on Tuesday.

The United States (US) President Donald Trump triggered a fresh wave of trade optimism after saying that trade talks with China are going “very well”. The move is in sharp contrast to his previous comments signaling the phase-one pushed back to late-2020. Elsewhere, the US-Iran tussle is providing a mildly negative pull to the trade sentiment.

The trade news triggered a recovery in the market’s risk tone and the US 10-year treasury yields covered nearly seven basis points (bps), to 1.78%, from Tuesday’s losses. Further, Wall Street snapped three-day losing streak while S&P 500 Futures also mark 0.70% profits to 3,110 while writing.

On the economic front, Australia’s third-quarter (Q3) Gross Domestic Product (GDP) dropped below expectations on QoQ but was less disappointing that the US calendar that carried four-month low ADP and sluggish services activity numbers.

Moving on, Australia’s October month Trade Balance and Retail Sales (MoM), expected 6,100M and 0.3% versus 0.2% and 7,180M respectively, could act as immediate catalysts. “The October retail sales survey is the first official reading on the consumer for Q4. Westpac looks for a sluggish 0.3%mth (nominal) rise in sales, in line with consensus. There remains some hope that the tax offsets will belatedly come through. Australia is on track for its 22nd consecutive monthly trade surplus in Oct. Westpac looks for the surplus to slip from A$7.2bn to $6.3bn, with exports -2.8%mth, led by lower iron ore prices and volumes and a retracement in gold exports. Imports should ease back a little too (-0.8%), partially correcting a 2.5% jump in Sep. Markets will focus most on retail sales but consistently large trade surpluses should not be forgotten as a source of support for A$,” says Westpac.

Following Australian data will be the US numbers of the weekly Jobless Claims, Trade Balance and Factory Orders. It’s worth mentioning that trade/political headlines will keep the driver’s seat all the time.

Technical Analysis

A sustained run-up beyond the recent high nearing 0.6865 could escalate the pair’s rise to 0.6900 and 0.6920/30 area including 200-day Exponential Moving Average (EMA) and October high. On the downside, sellers look for entry below 100-day EMA level near 0.6840 to revisit 0.6800 round-figure.