Australian Dollar, AUD/USD, China’s NDRC, Non-Farm Payrolls, Technical Analysis – Market Alert
- Australian Dollar weakens as China’s NDRC halts economic dialogue with AU
- Tensions between the two countries could hinder AUD/USD, US NFPs in focus
- AUD/USD may turn lower based on bearish Death Cross, but support is holding
The Australian Dollar fell as much as 0.6% against the US Dollar after reports crossed the wires that China’s economic planning agency (NDRC) is going to halt activities under the China-Australia Strategic Economic Dialogue ‘indefinitely’, according to Bloomberg. Tensions between the two nations have been brewing. In late April, Foreign Minister Marise Payne nixed two Belt and Road Initiative related deals with China.
The reason why this matters for the Aussie Dollar is that China is Australia’s largest trading partner. This means that disruptions between the two nations could be economically consequential. If this translates into a more uncertain outlook for the nation, that could make things more difficult for the Reserve Bank of Australia (RBA) as it tries to navigate the country past the coronavirus pandemic.
But that’s not the only fundamental development that can drive AUD/USD. The sentiment-linked currency can be quite sensitive to news flow that shapes the landscape for global growth. As such, it tends to move closely with benchmark stock indices, especially those based in the United States. That is why it saw some weakness on recent jitters stemming from Treasury Secretary Janet Yellen’s comment on monetary policy.
S&P 500 futures are pointing lower following the announcement from the NDRC, contributing to weakness in the Aussie Dollar. If sentiment continues to sour into the remaining 24 hours, then AUD/USD could be vulnerable, especially if there is a retort from Australian government officials. Then on Friday, keep a close eye on the US non-farm payrolls report. A better-than-expected outcome could push up bond yields, opening the door to AUD/USD weakness. But, still-dovish Fed commentary has been keeping bond markets cool.
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AUD/USD, S&P 500 Futures Reaction to NDRC Update, 15-Minute Chart
AUD/USD Chart Created Using TradingView
Australian Dollar Technical Analysis
AUD/USD may be at risk in the near term looking at the 4-hour chart below. The 20-period Simple Moving Average (SMA) crossed under the 50 equivalent. This formed a bearish ‘Death Cross’, hinting at the possibility of weakness. Still, prices have the 0.7702 – 0.7687 support zone to contend with. Clearing this area could open the door to revisiting early April lows. Getting there entails taking out the 23.6% Fibonacci retracement at 0.7641.
| Change in | Longs | Shorts | OI |
| Daily | 2% | -1% | 0% |
| Weekly | 0% | 32% | 12% |
AUD/USD 4-Hour Chart
Chart Created Using TradingView
--- Written by Daniel Dubrovsky, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
