The Australian Dollar (AUD) continues its slide against the US Dollar (USD). It has since dropped below the 0.6360-0.6350 range, printing fresh monthly lows. The declines just seen is due to an intense comeback of bid bias in favor of the USD. That momentum has only increased following recent landmark changes in US-China trade relations.
The US-China trade talks during the weekend provided the spark to light up the rally through risky assets. Consequently, worldwide capital markets are witnessing a wave of bullish risk joie de vivre. For many currencies, the USD has strengthened as much as it has at extreme historical dollar highs. As of writing, Japanese Yen (JPY) is exchanging hands close to the 148.00 level. This spike higher in USD/JPY is a good illustration of how this risk-on vibe is bad for traditional safer currencies, like the Yen.
This change in market dynamics is partly behind a general decline for AUD/USD. Analysts are sounding the alarm that the Australian Dollar is headed for even steeper losses. That trade remains dominated by the stronger USD. The wave of weakness from falling AUD values has hit commodity prices, with gold starting the week on the back foot. Gold pulled back, back under the $3,200 level per troy ounce—though significant support has formed at that round number.
The rally in riskier assets following the US-China trade talks indicates a significant breakthrough in relations between the two economic powerhouses. This progress has increased the appetite for risk and has weighed on safe-haven assets such as gold and the JPY. Second, gold gains look very capped above the ~$3,250 level. With further speculation on swings after this due to current market activity.