AUD/USD clings to 0.6975 as investors await China trade balance

12 Jul 2019

  • The Aussie remains firmly benefitted from the US Dollar (USD) weakness.
  • Exerting the downside pressure were threats to the trade deal between the US and China.
  • China trade balance will be the key to watch.

Chopped between the greenback weakness and disturbing signs for the trade deal concerning largest customer China, AUD/USD seesaws near 0.6975 amid initial Asian trading on Friday.

The USD continues to be on a back foot, despite upbeat inflation numbers, as the US Federal Reserve policymakers, including the Chairman Jerome Powell, hold their bearish bias towards monetary policy easing.

The global markets cheer easy monetary policy with Wall Street mostly holding their latest flight and the US 10-year treasury yield surging to a month’s high.

However, additional challenges to the US-China trade deal were raised by the US President Donald Trump’s tweet saying that China steps back from its promises to import more of the US farm products, coupled with negative comments about the dragon nation from one of his pick for the top military adviser.

Investors may now look forward towards the June month Trade Balance data from China to determine the near-term trading bias of the Aussie pair. Analysts at TD Securities expect soft trade numbers from China as they say:

We look for a deterioration in both exports and imports in June, with the former likely to drop by -3.0% and the latter by -9.2%. Weakness in trade continues to be signaled by forward looking indicators, with both new export orders and imports PMI, falling further into contraction territory in June. Additionally, exports from Korea to China continue to weaken, plunging by 24% y/y in June while imports are not much better, rising by only 1.2% y/y in the same months, adding further evidence to a softening in Chinese trade.

Technical Analysis

While 0.7000 round-figure and 100-day exponential moving average (EMA) level of 0.7016 can keep exerting downside pressure on prices, 0.6955 and 0.6910 numbers surrounding latest lows may limit the quote’s immediate declines.

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