Australian Dollar May Seesaw on Chinese CPI Data, US-China Risks

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Australian Dollar, AUD/USD Analysis, US-China Tension – TALKING POINTS

  • Australian Dollar may seesaw between Chinese CPI and political tension
  • US-China political rift widening after Trump signed key executive orders
  • AUD/USD retreat under key resistance could precede a broader pullback

Stocks traded mixed on Friday in what was a turbulent day. The Dow Jones and S&P 500 closed 0.17 and 0.06 percent higher, though geopolitical entanglements between the US and China hurt the information technology sub-categories in both benchmarks. This may help explain why the tech-leaning Nasdaq closed 0.87% lower.

Over the weekend, US President Donald Trump signed several executive orders, a large number of which targeted Chinese-based tech companies. The documents stipulated a ban on financial transactions between US-based citizens and Tencent’s WeChat and ByteDance’s video-streaming app TikTok. The move caught stocks – particularly tech – off-guard and further widened the rift between Beijing and Washington.

The US Dollar nursed some of its losses and was the session’s biggest winner at the expense of the Australian and New Zealand Dollars. A stronger Greenback from both a better-than-expects jobs report and a brief “dash to cash” moment pressured gold prices which had been in part supported by a weak USD. Cycle-sensitive commodities like crude oil and copper also suffered from the geopolitical shock.

Monday’s Asia-Pacific Trading Session

The Australian Dollar may be the center of attention among G10 currencies with Chinese CPI data on deck. Analysts are estimating a 2.6% reading for July, with expectations that PPI will show a -2.5% figure, slightly better than the prior -3.0% print. But perhaps what will be front and center will be growing US-China tension over technology.

Concern about the second, third and fourth-order consequences of Trump’s executive orders may cast a dark cloud over the cycle-sensitive Australian Dollar. Conversely, a premium may be put on haven-linked assets like the US Dollar and anti-risk Japanese Yen. To learn more about US-China relations and how they impact markets, follow me on Twitter @ZabelinDimitri for timely updates and reports.

AUD/USD Analysis

AUD/USD has pulled back after the pair suffered its biggest one-day decline in almost a month, right as it was approaching key resistance at 0.7295. The close below the lower tier of the 0.7206-0.7181 range could mean retreating to a trend-defining inflection area between 0.7018 and 0.6911. How AUD/USD interacts with this area could indicate either a resumption of the prior uptrend or the start of a broader pullback.

AUD/USD – Daily Chart

Chart showing AUD/USD

AUD/USD chart created using TradingView

— Written by Dimitri Zabelin, Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitriTwitter





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