- The Australian dollar is getting support amid increasing optimism on the US-China trade talks in Geneva.
- He called China’s Vice Premier a “one important first step” towards stabilizing the relations between the two countries.
- US Treasury Secretary Besant and Trade Representative Greer described the talks as a step towards reducing $ 400B business imbalance.
Australian Dollar (AUD) is growing against the US Dollar (USD) for a second straight session on Monday, constructing its recent speed. The AUD/USD pair is benefiting from increasing optimism around the US-China trade talks held in Geneva. As Australia maintains strong economic relations with China, development in the Chinese economy often has a direct impact on AUD.
After two days of talks aimed at reducing trade stress, both the US and China reported “adequate progress”. He described China’s Vice Premier described Lifeng as “an important first step” towards stabilizing bilateral relations. Meanwhile, US Treasury Secretary Besant and Trade Representative Greer called the discussions a constructive step towards reducing the $ 400 billion trade imbalance.
Focusing on China, President Xi Jinping is set to speak at the opening ceremony of the fourth ministerial meeting of the China-Selak Forum in Beijing on 13 May.
Further, the traders are looking at the Australian economic release, including the May Westpack Consumer Faith and the NAB business of April, both are scheduled for Tuesday, which can give new signs for Aud. Investors are also focused on upcoming American data, with consumer inflation data on Tuesday, followed by retail sales and manufacturer price index data on Thursday, they reduce the early impact of trade disputes on comprehensive economy.
Australian dollar advance due to progress in America-China trade talks
- The US Dollar Index (DXY), which measures the US dollar against a basket of six major currencies, is declining for the second day in a row, at the time of writing around 100.60. However, the US dollar received some support after the Trump administration progressed in trade talks with China over the weekend in Switzerland.
- Treasury Secretary Scott Besent called the two -day discussions “productive” with Chinese authorities in Geneva, saying that more information will be provided in briefing on Monday morning. Currently, China is struggling with an American tariff of 145%, while Beijing has responded with 125% tariff on US exports.
- Meanwhile, Commerce Secretary Howard Lutnik said that the 10% baseline tariff implemented in other countries is expected to be in place for the future of the future. “
- Last week, the Federal Reserve (Fed) left the interest rates unchanged at 4.25%-4.50%, but the statement highlighted the increasing concerns about inflation and unemployment, which found a layer of uncertainty in the market approach.
- In a post-meting press conference, Fed Chairman Jerome Powell warned that the ongoing trade tariffs may obstruct the central bank’s efforts to manage inflation and employment in 2025. She also suggested that frequent policy instability may motivate the Fed to take the more vigilant, waiting-and-looking approach to future rate moves.
- According to data released by the National Bureau of Statistics on Saturday, China’s Consumer Price Index (CPI) declined in the third consecutive month in April, corresponding to the market forecast and the drop recorded in March. Meanwhile, the manufacturer Price Index (PPI) signed a 2.7% YOY contract in April, below the market expectation of 2.5% decline in March and a decline of 2.6%.
- On the trade front, China posted a trade surplus of $ 96.18 billion in April, exceeding the forecast of $ 89 billion, but below $ 102.63 billion in March. Exports increased by 8.1%, performing better than the expected 1.9%, but slowed down the 12.4% profit seen earlier. Import 0.2% yoy, predicted -5.9% and a milky fall compared to both March -4.3%. China’s trade surplus with the US rose from $ 27.6 billion to $ 20.46 billion in March.
- In the property sector, Beijing is reportedly weighing a major improvement that will restrict pre -sales of homes and restrict transactions to assets. The proposed regulation aimed at bringing stability to the real estate market will apply to the sale of future land, except public housing, with the implementation left for local governments.
- Australia’s AI Group Industry Index showed improvement in April, although it marked the 33rd straight month of contractions-especially the weakness in export-rilatic manufacturing. These signs of continuous tenderness have strengthened the market expectations that the Reserve Bank of Australia (RBA) can deduct its cash rate by 25 basis points later this month.
Australian dollar may fall towards 0.6400 after breaking down from nine-day EMA
The AUD/USD pair is trading around 0.6420 on Monday. The technical analysis of the daily chart suggests a neutral bias as the pair maintained their position under the ascending channel pattern. However, the 14-day relative power index (RSI) remains comfortable above 50, suggesting that rapid bias is still in the game.
On the contrary, the AUD/USD pair can return to the ascending channel and return to a six -month height to reach 0.6515 on December 2, 2024. A brake pair above this level may support the pair to reach a seven -month high of 0.6687, reaching in November 2024. Further support appears on the upper border of 0.6730.
The AUD/USD pair is testing its initial support at 0.6420 in nine-day EMA, followed by 50-day EMA at 0.6345. A violation below these levels can rapidly weaken outlook and expose the pair to 0.5914 since March 2020.
AUD/USD: Daily Chart
Australian Dollar Faqs
One of the most important factors for Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country, another major driver is the price of its largest export, iron ore. The health of the Chinese economy, its largest business partner, is a factor, as well as inflation in Australia, its growth rate and business balance. Market spirit-Investors are taking more risky assets (risk-changes) or demanding safe-description (risk-closer)-this is also a factor, with the risk-on risk for Aud.
The Reserve Bank of Australia (RBA) affects the Australian Dollar (AUD) by determining the level of interest rates that Australian banks can lend to each other. This overall affects the level of interest rates in the economy. The main goal of RBA is to maintain a stable inflation rate of 2-3% by adjusting the interest rates up or down. Other major major central banks support relatively high interest rates AUD, and are contrast to relatively low. The RBA can also use quantitative spontaneity and tightening to affect the position of credit with pre-aud-negative and subsequent Aud-positive.
China is the largest trading partner in Australia, so the health of the Chinese economy is a major impact on the value of the Australian Dollar (AUD). When the Chinese economy is doing well, it raises the demand for more raw materials, goods and services, AUD, and further its value than Australia. Conversely, the case is when the Chinese economy is not growing rapidly as expected. Positive or negative surprise in Chinese development data, therefore, often has a direct impact on the Australian dollars and its pairs.
Iron ore is Australia’s largest exports, according to 2021 data, accounting for $ 118 billion per year, with China as its primary destination. Therefore, the price of iron ore can be the driver of the Australian dollar. Generally, if the price of iron ore increases, theres also increase, as the total demand for currency increases. If the price of iron ore falls, then the opposite is the case. High iron ore prices are also as a result of a more probability of a positive business balance for Australia, which is also positive for AUD.
The difference between the business balance, which earns from the export of a country, is the difference between what he pays for his import, another factor that can affect the value of the Australian dollar. If Australia makes excessive demand after export, its currency will receive purely value from surplus demand made from foreign buyers, which spends to buy vs. imports to buy its exports. Therefore, a positive net trade balance strengthens the AUD, if the business balance is negative, then with the opposite effect.
