AUD/USD rejects 0.78 handle ahead of RBA on Tuesday

  • The Reserve Bank of Australia (RBA) minutes are scheduled for next Tuesday at 1:30 GMT.
  • US Retail Sales are slated on Monday at 12:30 GMT.
  • The AUD benefitted this week from a wave of positive sentiment as China says it is ready to open its economy and push free trade.

The AUD/USD is trading at 0.7767 up 0.16% on Friday as the second week of April is coming to an end. 

The Australian dollar gained as much as 150 pips over the last days as earlier in the week Chinese President Xi Jinping said that he intended to open up its economy and push for free trade. Therefore alleviating the China-US trade war tensions. China is the first Australian’s trading partner and therefore the positive trade news also affected the AUD. Additionally, an increase in Chinese import also helped to the positive sentiment. 

Coming up next week on Monday in Australia is the New Motor Vehicle Sales for January released by the Australian Bureau of Statistics. The news shouldn’t be a market mover. However, Tuesday will see the much more important release of the minutes of the Reserve Bank of Australia meetings which are published two weeks after the interest rate decision. 

In the US, next Monday will see the release of the Retail Sales dataset at 12:30 GMT and a speech from Raphael W. Bostic who is a voting member of the Federal Open Market Committee, scheduled at 17:15 GMT.

Earlier in the week on Wednesday in Australia, RBA Governor Phillip Lowe said rates are “unlikely to move anytime soon” therefore keeping the same rhetoric. On Thursday, Consumer Inflation Expectations for April decreased from 3.7% to 3.6% without much negative impact on the AUD. 

AUD/USD daily chart:

“The rise of the AUD/USD is also seen in Momentum and the RSI. The pair jumped over the 50-day Simple Moving Average and is currently capped by the broader 200-day SMA which awaits around  A$0.7815. 

One bearish sign to bear in mind: the "death cross." The 50-day SMA recently crossed the 200-day SMA to the downside.  However, this nicely named pattern does not always work as advertised. There is another line that carries more weight: AUD/USD is capped by downtrend resistance in the channel.

Looking up, resistance awaits at 0.7815, the 200-day SMA and then 0.7850 that separated ranges during March. Further above, the round number of 0.7900 stopped the pair's rise earlier in the year. 

On the downside, 0.7740 was a cushion in mid-April after serving as resistance earlier. Further down, 0.7710 was a line of resistance in late March. The cycle low of 0.7650 awaits below.” Says Yohay Elam, chief analyst at FXStreet.

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