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Australian Dollar at Tipping Point as US-China Tensions Heat Up?

Australian Dollar at Tipping Point as US-China Tensions Heat Up?

Daniel Dubrovsky, Analyst

Australian Dollar, AUD/USD, US-China Tensions, Trade War Fears – Asia Pacific Market Open

  • Australian Dollar struggles at resistance after risk aversion sank stocks
  • US-China tensions may have fueled trade war fears as US Dollar rose
  • Japanese Yen may rise if Asia Pacific stocks fall, eyeing BoJ meeting

The sentiment-linked Australian Dollar aimed cautiously lower Thursday amid a deterioration in market mood. By Wall Street close, the Dow Jones and S&P 500 wrapped up -0.41% and -0.78% respectively. This is as the haven-oriented US Dollar and similarly-behaving Japanese Yen outperformed their major counterparts. Anti-fiat gold prices fell 1.20%, the most in 3 weeks amid a stronger Greenback.

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Risk aversion gathered momentum early on during the Asia Pacific trading session. This is as US President Donald Trump dialed up criticism against China for a “disinformation and propaganda attack on the United States and Europe”. Trump has expressed his dissatisfaction with how China handled the coronavirus outbreak, hinting at using tariffs in response.

That has brought back fears of a US-China trade war which were underscored during the North American trading session. In response to Trump, China said that the nation will “safeguard sovereignty, security and interests”. According to AFP News Agency, China threatened ‘countermeasures’ in response to US coronavirus sanction threats. Stocks declined following these developments.

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Friday’s Asia Pacific Trading Session

Asia Pacific equities could follow the pessimistic lead from Wall Street. That may bode ill for the Australian Dollar while benefiting the Japanese Yen and US Dollar. There is an emergency Bank of Japan (BOJ) meeting scheduled at 00:00 GMT. The central bank is not expected to adjust its main policy tools. Markets seem to be eyeing measures to help support small businesses. With that in mind, the Yen may look past the BoJ and focus on the broader trajectory in market mood over the remaining 24 hours.

Australian Dollar Technical Analysis

The AUD/USD is struggling to find follow-through after prices attempted to push above key resistance (0.6546 – 0.6570). This area was established after prices found a top in late April. Since then, negative RSI divergence has emerged. This is a sign of fading upside momentum which can at times precede a turn lower. Such an outcome could place the focus on support below at 0.6469.

AUD/USD BULLISH
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Change in Longs Shorts OI
Daily -7% 7% 1%
Weekly -19% 9% -6%
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AUD/USD – Daily Chart

Australian Dollar at Tipping Point as US-China Tensions Heat Up?

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--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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