TALKING POINTS – AUD/USD, RBA, EQUITIES, TRADE WARS
- AUD/USD pares losses after mostly in-line housing inflation data, September RBA minutes
- However, AUD/USD is still engaged in downside momentum near Dec 2016 support levels
- US-China tariffs, equities’ performances, and Fed rate decision in the spotlight next two weeks
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The Australian Dollar strengthened against its US namesake after local economic data crossed the wires early into Tuesday’s Asia Pacific trading session. Second quarter year-on-year housing inflation came in at -0.6%, a slight uptick from economists’ forecasts of -0.7% and a decrease from the 2.0% prior. The gauge measured quarterly was -0.7% in line with both the estimate and previous figure of -0.7%. AUD/USD’s ascent helped pare losses sustained earlier in response to the Trump administration announcement of 10% tariffs on $200B worth of Chinese goods, rising to 25% in 2019.
AUD/USD Chart (5-minute)
Chart prepared in TradingView
The rise in Aussie Dollar was further compounded by the release of the Reserve Bank of Australia’s September 4th meeting minutes. The central bank noted that while there was no strong case for near-term adjustment in policy, the next move in the cash rate is more likely to be an increase. The monetary authority also stated that while risks remain from uncertainty abroad and low wages growth, the modest decline in the Australian Dollar has been helpful for domestic growth.
As the RBA highlighted, the sentiment-linked unit has been steadily weakening against the US Dollar for the majority of 2018. Recently, the pair broke May/December 2016 support levels near the 0.716 figure, but slightly reversed its bearish momentum. AUD/USD traders should look to signs of possible RSI divergence and confirmation by breaking the downtrend channel before next moves.
AUD/USD Chart (Daily)
Chart prepared in TradingView
Looking forward, the Aussie Dollar faces a relatively light docket of local economic data, with job vacancies and private sector credit figures coming out in the next two weeks. Rather, the pro-risk unit will be closely watching the implementation of US tariffs on $200B of Chinese goods on September 24thand equities’ weak performances, possibly driving the currency lower. Furthermore, AUD/USD traders should also pay attention to factors moving the greenback, specifically the release of US PMI figures and the Federal Reserve’s rate decision.
AUD/USD Trading Resources
- Join a free Q&A webinar and have your trading questions answered
- Just getting started? See our beginners’ guide for FX traders
- Having trouble with your strategy? Here’s the #1 mistake that traders make
- See how the Australian Dollar is viewed by the trading community at the DailyFX Sentiment Page
--- Written by Megha Torpunuri, DailyFX Research Team
