The Australian dollar (AUD) is on fire against the US dollar (USD)! Currently during Friday’s Asian trading session, the 0.6450 mark level is in sight with AUD/USD exchange rate. This bullish shift in trend is indicative of a more prevalent bullish theme in the market as optimism continues to permeate the markets with US-China trade talks. This development has been cited by analysts as the most important factor driving the currency pair’s sharp decline.
Friday saw AUD/USD in a very bullish high-volatility trading day, setting the pair up with bullish bias ahead of…Traders were quick to respond to the headlines from the other side of the world. Consequently, the currency pair targeted the key resistance level at 0.6450, capturing the interest of traders. The AUD/USD exchange rate is surging, an indication of increasing investor optimism that trade relations between the United States and China are improving. This optimism is propping up the Australian dollar.
The connection between AUD/USD and the state of politics in Australia proves why this currency pair is volatile. As Australia approaches federal elections, economic stability, strong decision making and leadership will play a large role in shaping investor sentiment. More recent, mixed economic data on the Australian Producer Price Index (PPI) and Retail Sales adds further confusion to the economic landscape. These new developments pose further challenges to the analysts and policymakers. Yet, despite these counteracting signals, the bigger picture remains largely bullish for the AUD.
This picture is confused even more by the extreme nervousness ahead of the release of the next Non-Farm Payrolls (NFP) report from the United States. Given its status as the most important economic indicator, the NFP report can move currencies inches at a time. Additionally, investors are listening for indications that employment numbers will begin to move in the right direction. What do these changes mean for the Federal Reserve monetary policy making decisions and, in turn, the AUD/USD rate?
Expectations of a trade breakthrough between the US and China have helped to boost AUD/USD, spurring today’s strong upward push. The hope of lighter trade clouds is of particular note to the Australians, who were doing just fine riding the wave of exports to China. As these negotiations continue, participants in both countries’ markets will want to keep a close eye, judging how events might affect each currency.
Along with the geopolitical narrative, domestic economic data has come in decidedly mixed. Aussie dollar traders were on high alert after the latest Australian PPI data exhibited erratic spikes that would have caused nervousness. Likewise, mixed results from Retail Sales data point to increasing chinks in consumer spending armor that only raise the stakes of where the economy goes in the coming months. Tied to the return of the hostilities, traders are quickly assessing outside influences vs. internal fundamentals. Therefore, the macro outlook for AUD/USD remains bullish in spite of these headwinds.