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AUD/USD holds tightly to 0.6860 amid cautious optimism

  • AUD/USD struggles between the trade-positive sentiment and downbeat data home, not to forget upbeat greenback.
  • Chinese efforts to pave away for a good start in October talks support market’s risk-on.
  • Trade news can entertain investors ahead of the key data/event of the week.

Having been chopped between the optimism surrounding the US-China trade sentiment, sluggish data at home and broad US Dollar (USD) strength, AUD/USD hugs tightly to 0.6860 during the initial Asian session on Thursday.

While the slump in Westpac Consumer Confidence dragged the Aussie pair downward amid Wednesday morning, news of China’s Finance Ministry’s list of the US goods to be exempted from tariffs renewed risk-on.

The mood gained additional support from the US Producer Price Index (PPI) and MBA Mortgage Application that propelled the USD and scaled some of the Antipodeans’ gains backwards.

As a reaction, the US treasury yields surged to the monthly highs while Wall Street also closed in the positive territory.

Adding to the previously built trade-positive sentiment is the recent news that China’s Premier Li Keqiang held a positive attitude towards solving the US-China trade relations while meeting a delegation of the US business leaders.

However, investors remain a bit cautious ahead of the key day including monetary policy meeting by the European Central Bank (ECB) and the US Consumer Price Index (CPI) data. ANZ seems to be dovish for the ECB outcome while saying, “A cut is widely expected but markets are also looking for guidance on the likelihood of another round of QE being deployed by the ECB.” TD Securities hold a downbeat view for the US CPI as it said, “We look for headline CPI to slow a tenth to 1.7% y/y in August (flat m/m) on the back of a notable decline in energy prices. Core inflation should tick up a tenth to 2.3% y/y, reflecting a firm 0.2% m/m advance — though slightly softer than in Jun-Jul as core goods inflation was likely flat m/m. That said, a steady 0.2% m/m gain in services should support core CPI.”

Technical Analysis

With sustained trading above 50-day exponential moving average (EMA), coupled with bullish signal from 12-day moving average convergence and divergence (MACD), the Aussie pair is likely to keep challenging the 0.6905-10 area including 100-day EMA and July 10 low. Though, a downside break below 0.6840 level of 50-day EMA could question sellers with multiple supports around 0.6820 and 0.6800 round-figure.

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