AUD/USD pops and drops as China’s PMI confront trade truce ahead of second-tier data

  • Weaker than forecast China PMIs question trade sentiment despite US-China trade truce.
  • Aussie housing, TD inflation, and China’s Caixin Manufacturing PMI can offer near-term trade directives.

Having popped to fresh 7-week high, the AUD/USD retraces some of its gains to 0.7030 during early Monday as traders ascertain recently weaker PMIs from China in comparison to the US-China trade truce headlines.

The trade truce between the US and China offered a sigh of relief to market players at the start of the week’s trading session in Asia. However, optimism couldn’t last long as traders also emphasized China’s official Manufacturing and Non-Manufacturing Purchasing Managers’ Index (PMI) numbers.

The US and China agreed to put a halt on the further trade war and restart negotiations to carve out differences on the future trade terms. The US President Donald Trump agreed not to levy fresh tariffs on Chinese goods and considered releasing some pressure off China’s Huawei in return of higher farm imports from China.

Additionally, key differences between the US and China about technology transfer and intellectual property rights are still unresolved and will be discussed starting from July 02.

While a trade truce between the world’s two largest economies, including Australia’s largest customer China, should have pleased the Aussie buyers, weaker than forecast China PMI confined the optimism. China’s June month Manufacturing PMI weakened to 49.4 from 49.5 forecasts whereas Non-Manufacturing PMI flashed 54.2 versus 54.5 expected on Sunday morning.

Looking forward, Australia’s May month HIA New Home Sales, TD Securities Inflation and China’s Caixin Manufacturing PMI could offer fresh directives to near-term trading sentiment. While the Aussie housing market indicator slumped -11.8% during the previous release, the inflation gauge flashed 0.0% mark earlier. Further, China’s manufacturing index could follow official readings while likely flashing 50.0 mark versus 50.2.

Technical Analysis

A 100-day exponential moving average (100-day EMA) at 0.7024 acts as immediate support for the pair ahead of highlighting 0.7000 and 21-day EMA level of 0.6965 whereas April 30 top near 0.7050 could cap near-term upside.

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