The Australian Dollar (AUD) is crashing once again versus the US Dollar (USD). As for the dollar, perhaps counter-intuitively, it has since slipped back to the 0.6360-0.6350 range, touching monthly lows. What triggered this fall was a powerful resurgence in demand for the US Dollar. This move was primarily driven by a classic growth-oriented rebound in global markets following the recent extension of the US-China trade truce.
Over the weekend, major trade talks were held between the US and China. These negotiations paved the way for one more breakthrough that renewed investor appetite for speculative assets. With risk sentiment having dramatically improved, the traditional beneficiaries of haven flows led by the USD, the YEN have drowned. The Japanese Yen (JPY) is currently hanging around the 148.00 level on the USD/JPY chart. The USD/JPY jump underscores how the mood among investors continues to be overwhelmingly rosy as they shift back to riskier assets.
The US Dollar is getting stronger and developing a strong bid bias. This shift is providing a downward force on the AUD/USD pair. Analysts forecast more Australian Dollar weakness to come as market conditions remain stacked against most any currency and in favor of the greenback. The fall of AUD/USD is a direct mirror of the current market risk sentiment. This sentiment had turned moderately bullish by a wide margin, following encouraging news on US-China trade negotiations.
This week gold prices came under pressure at the open. They pulled back down toward the $3,200 per troy ounce level as a result of currency shifts. Yet, even with this drop, considerable gold support has built up near this level. This indicates progress in the right direction and some potential stabilization despite the transformative market changes. Investors often flock to gold during times of uncertainty. The prevailing risk-on sentiment appears to have made gold less appealing as a safe-haven asset.
The interplay between the US Dollar’s strength and the performance of other currencies, including the AUD and JPY, continues to shape investor strategies. The latest round of US-China trade negotiations weighed heavily on global market sentiment. Consequently, traders are returning to market bases now rethinking what risk is and what safety looks like.