- Australian Dollar rose, sentiment improved on a speech by China’s President Xi Jinping
- Mr. Jinping helped to reduce trade war fears as he emphasized on pushing for free trade
- AUD/USD is trying to push higher, a bullish reversal pattern foreshadows a lasting move
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The Australian Dollar appreciated as sentiment improved on a speech by China’s President Xi Jinping. Leading into this event, the markets were eagerly awaiting how the country would respond to Donald Trump’s threat of what could be an additional $100 billion in tariffs against China. In fact, halfway into Monday’s session, trade war fears ebbed.
What seemed to restore more confidence in the markets was Jinping’s emphasis on pushing for free trade and opening up the country. Mentions of retaliating to additional US tariff proposals were also absent. In fact, Mr. Jinping noted that China is pushing forward economic globalization. He added that the country will widen access to the market and that they will push to expand imports.
Comments from Xi Jinping:
- Should push for free trade, China will continue to open up
- Hopes countries will lower curbs on high-tech trade
- China to reduce tariffs on auto-related products
- China to lower foreign ownership restrictions, especially in auto
- Automobiles, ships and aircraft sectors to be opened up
- To explore setting up free trade ports, opening up leads to progress
With that in mind, attention now turns to the world’s largest economy and how Donald Trump responds next. If he echoes his optimistic tone on a trade deal from Monday, then sentiment-linked currencies like the Australian and New Zealand Dollars might benefit if trade war fears continue abating.
AUD/USD Technical Analysis:
On a daily chart, the Australian Dollar seems to be making a push against its US counterpart to the upper line of the falling wedge bullish reversal pattern. This is because AUD/USD is trying to break above a near-term descending resistance line (red line on chart below). If the pair ends up finishing the day above it, a more lasting reversal could potentially be in the cards.
However, to get there, AUD/USD will also have to push above the 61.8% Fibonacci retracement level at 0.7743. Keep in mind that positive RSI divergence is present and it signals ebbing momentum to the downside. This gives another argument that the pair may turning higher. A break above the wedge exposes the 50% midpoint at 0.7818.
If prices fall instead, the 76.4% retracement at 0.7651 could stand in the way as near-term support. In fact, AUD/USD has struggled to fall below this level for the past almost two weeks. If it does, that will expose that rising trend line from January 2016 and it may hold up the pair.
AUD/USD Trading Resources:
- Join a free Q&A webinar and have your trading questions answered
- 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 Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
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