AUD/USD takes the bids to 5-week high ahead of Australia/China data

  • AUD/USD lures buyers around July-end levels amid no change in market sentiment.
  • The hopes of further easing at China, the US-China trade deal and the USD weakness favor Antipodeans alike.
  • Australia’s NAB Business Confidence/Conditions, China’s CPI/PPI are in the spotlight for now.

With the absence of major data/event pushing traders to extend the previous momentum forward, the AUD/USD pair stays strong around five-week high to 0.6865 during the initial Asian session on Tuesday.

The weekend release of China’s trade numbers further heightened the easy money concerns from the People’s Bank of China (PBOC) as it stood ready to slash reserve requirements for bank/financial intermediaries on Friday.

Adding to the optimism is the US-China trade developments that have been positive so far with the latest comments from the US Treasury Secretary indicating the Trump administration’s readiness to have a conceptual agreement with the dragon nation when they meet in October.

The greenback remains mostly weak as no major catalysts underpin expectations of cautious or dovish comments from the Fed considering Friday’s downbeat Nonfarm Payrolls (NFP) and the US President’s repeated push towards rate cuts.

As a result, Dow Jones registered the fourth straight day of positive closing while treasury yields also stretch earlier rise.

Moving on, August month numbers from National Australia Bank’s (NAB) Business Confidence/Conditions and China’s Consumer Price Index (CPI) and Producer Price Index (PPI) will be the key for pair traders to watch. While China’s CPI is expected to weaken to 2.6% from 2.8% on a YoY basis, the MoM figure may rise to 0.5% from 0.4% whereas PPI (YoY) could further dip into the negative region with -0.9% forecast versus -0.3% previous readouts.

Further, Australia’s Business Confidence data earlier posted 4 mark with Business Conditions marked 2. TD Securities holds a bit downbeat view for the Aussie sentiment numbers as it says, “NAB Business Survey for Aug. The softening in the employment subcomponent from -5pts to 0 drove business conditions lower by 2 pts with retail and manufacturing under pressure. Tax cuts may help to boost confidence but we think global growth/trade concerns are more likely to have dominated. The main components of the July survey that registered drops were trading conditions -1pt, employment -5pts, forward orders -3pts, and capacity utilization from 82.1% to 80.9%.”

Technical Analysis

The 0.6905/10 area including 100-day exponential moving average (EMA) and July 10 low becomes the key upside resistance as it holds the gate for the quote further run-up towards 0.7000 round-figure. However, overbought conditions of 14-day relative strength index (RSI) might trigger the pair’s pullback to 50-day EMA level of 0.6800 should the scheduled data disappoint.

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