AUDUSD remains stuck in a range: traders await US-China breakthrough

Fundamental
OverviewThe USD strengthened a bit
on Friday following some positive Trump’s comments on China as Treasury yields
bounced and erased the Thursday’s losses. Overall, the US dollar performance
has been mixed as markets have been driven by quick changes in risk sentiment
since Trump’s tariffs threat. On the domestic side, the
US government shutdown continues to delay many key US economic reports. The
dollar “repricing trade” needs strong US data to keep going, especially on the
labour market side, so any hiccup on that front is weighing on the greenback. The BLS will release the US
CPI report on Friday despite the shutdown, so that’s going to be a key risk
event. That will need to be seen in the context of US-China relations and any
negative shock by that time though. If things go south, then the CPI will not
matter much as growth fears will trump everything else. On the AUD side, the
commodity currency sold off aggressively across the board following Trump’s
tariff threat on China. Given the close link between China and Australia on the
trade side, the market increased the dovish bets on the RBA given the new risk.
Eventually, the AUD bounced back following more soothing comments from Trump
and other US officials. Nevertheless, the currency has been mostly rangebound
since the tariff threat and it looks like the market is just waiting for a
clear breakthrough on that front. On the monetary policy
side, the RBA kept everything unchanged at the last meeting with RBA Governor
Bullock not offering much in terms of forward guidance other than the usual
data dependency and meeting by meeting approach to interest rate decisions. AUDUSD
Technical Analysis – Daily TimeframeOn the daily chart, we can
see that AUDUSD is consolidating between the 0.6520 resistance and the 0.6440
support. The market participants will likely continue to play the range until
we get a breakout on either side. AUDUSD Technical
Analysis – 4 hour TimeframeOn the 4 hour chart, we can
see more clearly the recent rangebound price action caused by the new US-China
trade tensions. The sellers will likely continue to lean on the resistance to
keep targeting a break below the support, while the buyers will either wait for
a pullback into the support or a break above the resistance to pile in for a
rally into the major trendline.AUDUSD Technical
Analysis – 1 hour TimeframeOn the 1 hour chart, there’s
not much else we can add here as we remain stuck in this range for the time
being. The red lines define the average daily range for today. Upcoming CatalystsThe focus remains
on the US-China developments but on Friday we will also get the US CPI report and the US flash PMIs.
This article was written by Giuseppe Dellamotta at investinglive.com.

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