AUD/USD: Trump rally held up at key 0.7380, external influences at play

• AUD/USD has been on a tear on dollar weakness on the back of Trump's interview and dovish comments on CNBC.
• Trump was calling for the Fed to stop raising rates - AUD/USD has rallied from 0.7322 to 0.7379 on the back of the interview.
• But, Trump has no legal position to be able to instruct the Fed what to do.

“I don’t like all of this work that we’re putting into the economy and then I see rates going up,” 

- Trump said. 

AUD/USD has been trading between a high of 0.7441 and a low of 0.7322. The rally has been held up at 0.7380 so far. Meanwhile, it may not be too long until the dollar is bought back right to where it fell but so far, the market has shed the majority of the move and there is still 40 pips in the DXY to go.

The point being is that Trump has no legal position to be able to instruct the Fed what to do. It is true that Trump and the Congressional leaders are free to complain all they like. Congress can call hearings and use subpoenas to compel Powell to listen to their complaints, but the FOMC members vote and that's that. 

AUD/USD's fate depends on external factors and that stellar jobs data is not going to budge the RBA 

Meanwhile, investors are paying attention to China that appears to be sliding again in terms of economic performance.  This also equates to lower industrial metal prices which the Aussie is traded as a proxy as well. 

"Considering the savage beating industrial metals have taken from the escalating global trade tensions, the loss of emerging market risk appetite and an increasingly powerful US dollar, investors would not be blamed for believing that base metals and platinum group metals (PGMs) have nowhere to go but down for the rest of the year," analysts at TD Securities explained.  However, the analysts also argued that based on the recent Chinese housing price data, industrial activity and China's readiness to stimulate should all serve as a backstop to additional sharp declines. "Conversely, few signs that the US and western economies are sharply slowing also point to decent metals demand, which should reestablish supply-demand tightness."

Chinese yuan (CNY) has extended its depreciation versus the US dollar sending AUD/USD off a cliff

However, in the near term, the Chinese yuan (CNY) has extended its depreciation versus the US dollar in recent trading days and that too weighs on the Aussie.  The CNY has given up around 8% of its value since its late March peak and 5.5% since mid-June and is now back to the levels seen one year ago. In fact,  for the first time since the 9th August 2017, the yuan fixing was set beyond 6.70, as analysts at ABN AMRO noted earlier sighting that the escalating trade conflict with the US has been a key factor where, "Beijing may also use some exchange rate weakening as tool in the current trade war with the US, to correct for the effects of higher import tariffs." Read their opinion on this matter in full here: Renewed pressure on Chinese yuan – ABN AMRO

Meanwhile, and fundamentally for the Aussie, while the Yuan's devaluation was a huge weight on the Aussie overnight, where the post stellar jobs report, (Jobs rose 50.9 K vs expectations of a 17 K rise), tops of 0.7441 were taken down to 0.7321 for the European low, the central bank divergence should continue to play out the downside objectives for the bears while The Reserve Bank of Australia, (RBA),  has communicated quite clearly that for months, if not years, rates will remain on hold for the foreseeable future.

While that jobs data was strong, crucially, wage and inflation pressures remain subdued and Australian Q2 CPI data due on July 25 should once again confirm this.  The influences on the Aussie remain external and Chian and the Fed remain the key risks. However, so long as Chinese authorities continue to cushion the blow of trade wars and slower growth, the Aussie shouldn't fall too far within the 0.7300-0.7500 recent ranges. 

AUD/USD levels

Analysts at Commerzbank noted that the AUD/USD remains offered following its recent failure at the 55 day MA at 0.7484:

"The intraday Elliott wave count is negative and we would allow for a retest of the 0.7315 recent low. Below 0.7315 the market is capable of a slide to the 2001-2018 uptrend line at 0.7176. Above the 55 day ma would allow for a recovery to the downtrend at 0.7554."