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AUD Analysis and News

  • AustralianDollar sells off after the Trump administration announces $200bln worth of tariffs
  • AUDbears look to make a move towards the 2018

Our trading forecasts for Q3 have just been published; you can find them here.

President Trump Fires Another Round of Tariffs

Overnight, the Trump administration stated that they will impose another round of tariffs of 10% on $200bln worth of Chinese goods. This came in response to China implementing reciprocal tariffs of $34bln on US goods following the US implementation of tariffs on July 6th. The Chinese have stated that they will be forced to retaliate, as such, this has dampened the prospects for the Australian Dollar given Australia’s reliance on the Chinese economy, subsequently, this has increased the scope for AUD bears to attack the 2018 lows (0.7310).

Australian Dollar Technical Outlook

AUDUSD trend signals are weak with RSI indicators suggesting the bias is towards the downside. A break and a close below the 20DMA at 0.7398 would confirm that the outlook for the pair is bearish, which given the escalating tensions, seems increasingly likely. Alongside this, the series of lower highs continues to signal that the AUDUSD downtrend is intact. Bears are looking to make run in on the 2018 low situated at 0.7310, however, support is seen at 0.7340, which could curb some selling pressure.

AUDUSD PRICE CHART: DAILY TIME FRAME (January 2018-July 2018)

AUDUSD Bears Eye 2018 Lows Amid Escalating US-China Trade War

Chart by IG

AUD Short Positioning at Highest Since Q4 2015

Given the backdrop of trade wars short positioning in the Australian Dollar remains elevated with net shorts equating to $3bln. This in turn has seen speculators the most bearish on the Australian Dollar since Q4 2015 with room for shorts to build amid the escalation in the US-China trade war.

AUDUSD Bears Eye 2018 Lows Amid Escalating US-China Trade War

Source: Thomson Reuters (CFTC Speculative Positioning)

According to IG Sentiment, AUDUSD may continue to fall. For more information of client positioning, click here

BACKGROUND ON TRADE WARS

US-China Trade War: An Inevitable Conflict and the Impact on Equities, FX

US-China Trade War & a Brief History of Trade Wars – 1900 until Present

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX