In a currency market that is exhibiting extreme strength, the AUD/USD pair is surprisingly resilient. It remains close to its year-to-date high as traders keenly await Friday’s US Non-Farm Payrolls (NFP) report. Nearby, the Australian dollar has looked well underpinned on a positive bias. This strength is mostly a function of a positive market risk tone and increasing optimism over US-China trade talks.
At writing the AUD/USD is trading with a positive momentum on the back of all these factors that more or less have kept the pair supported. The increasing calls for the Federal Reserve to increase their pace and depth of future rate cuts are a big factor driving this trend. Consequently, the USD has become severely depressed. The US dollar index is trading around its lowest point since April 22. This sharp decline is increasing the value of the Australian dollar.
Positive US-China trade talk sentiment has helped to prop up the AUD too, as traders continue to hold out hope for something positive to emerge from ongoing negotiations. This optimism has the added benefit of supporting the Australian dollar. It is impressive that this has held firm despite the RBA’s dovish shift. Communication is very important. The RBA adopts a cautious style when it comes to monetary policy. It’s not as simple as that though, because very favorable external factors are boosting the strength of the AUD.
Traders are especially interested in the US Non-Farm Payrolls (NFP) report due out on Friday. This new provision has provoked their curiosity and piqued their interest in the movement of markets. Market participants of every stripe will be eager to try to determine how all this labor market data combined will shape future Federal Reserve policy action on interest rates.
“AUD/USD remains close to the YTD top as traders await the US NFP report” – www.fxstreet.com
The risk positive tone in financial markets is another support backstop for the Australian dollar. When sentiment is positive, investors aggressively seek out the higher-yielding assets, like the AUD. This increased demand just adds to its value against other currencies.
The RBA’s dovish turn could put traders on the defensive. Yet whatever concerns are raised by these somewhat less positive signs are clearly being overwhelmed by the good news. Domestic monetary policy and external economic conditions are in a constant dance, creating a unique environment to currency trading. Traders must remain alert and flexible to succeed in this constantly evolving landscape.
As markets and traders look for guidance from next Friday’s much-anticipated NFP report, they will be watching market reactions with great interest. The ramifications of this data could greatly impact currency values and the trading movement in the coming days.
“USD/JPY sticks to positive bias above mid-143.00s; US NFP awaited” – www.fxstreet.com