AUD/USD holds on to recovery gains around 0.6840, pays little heed to China data

• AUD/USD stays modesty changed after Friday’s recovery.
• China’s exports slumped more than expected, imports surged for the first time since April.
• Trade/political headlines in the spotlight amid a light economic calendar.

AUD/USD seesaws around 0.6837 at the start of the week’s Asian session on Monday.  The Aussie pair shows no major reaction to the drop in China’s exports as a rise in imports counters the bears.

Data released during the weekend showed China’s November Exports fell unexpectedly to -1.1% versus +1.0% forecast whereas Imports rose, +0.3% against -6.4% prior, for the first time since April. While more than expected dip in exports should have dragged the Aussie at the week-start, traders seem to concentrate more on the multi-month top imports. Speculations are also making rounds that a surge in Chinese demand could be considered as a leading indicator for the global economy and hence improves the market mood.

The pair recovered on Friday as the market’s sentiment benefited from the upbeat employment data from the United States (US). The November month jobs report reported surprisingly high Nonfarm Payrolls (NFP) to 266K while Unemployment Rate revisited a 50-year low of 3.5%. Additionally, the Preliminary reading of Michigan Consumer Sentiment Index also beat market expectations to 99.2.

While the recovery in data from the world’s largest economy managed to boost the market’s risk-taking capacity, looming uncertainty over the US-China trade deal kept the risk-on under check. As a result, the US 10-year treasury yields recovered nearly five basis points (bps) to 1.843% by the end of the last week.

Moving on, a light economic calendar will keep traders on the lookout for clues from trade/political headlines. The recent mood on the phase-one negotiation table seems to be mildly positive after Xinhua reported that China will implement tariff waivers for some of the US soybeans and pork. At the political front, the tension surrounding North Korea and Iran will join the upcoming election in the United Kingdom (UK) to compress the risk-on. Further, monetary policy meetings by the European and the US central banks will also offer a busy week ahead. However, Tuesday’s speech from the Reserve Bank of Australia’s (RBA) Governor Philip Lowe can offer immediate direction.

Technical Analysis

Sustained trading beyond the last weeks top near 0.6865 could trigger fresh run-up to multi-month-old falling resistance line near 0.6895, a break of which will extend the rally. On the downside, November lows near 0.6755 provide near-term key support.