AUDUSD Pares Gains from RBA Meeting Minutes on Concerns Over Chinese Tariffs

Summary:
• AUDUSD is trading around its opening price, paring its gains from the RBA meeting minutes, after Australian officials expressed concerns on Chinese tariffs.

AUDUSD has pared all of its gains after it rallied to a high of 0.6550 following the RBA Meeting Minutes. As of this writing, the currency pair is trading slightly below its opening price around 0.6519. With Australian policymakers expressing concerns over tariffs imposed by China, could we soon see AUDUSD drop?

According to the minutes of the most recent RBA rate decision, central bankers feel that the best course of action is to monitor the economy and financial outlook. Policymakers reiterated that they are ready to increase bond purchases if financial conditions worsen. If you remember, on May 11, the RBA kept rates steady at 0.25%.

On the other hand, Australian Trade Minister Simon Brimingham expressed concerns over China’s imposition of tariffs on Australian barley. More than the loss of income that it poses to Australian farmers, the minister said that he is worried about further action that China might take. Last week, the latter also imposed restrictions on Australian beef imports. There are speculations that China’s moves are a retaliation against Australia’s calls for an investigation on how the coronavirus started.

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AUDUSD Outlook

On the daily time frame, it can be seen that for the first time this month, AUDUSD closed above the 100 SMA. Technical analysts could interpret this as a sign that there are enough buyers in the market. AUDUSD could soon then trade higher to test resistance around the 200 SMA at 0.6662. If there is enough bullish momentum, we could even see the currency pair trade all the way up to its January highs at 0.7020.

Alternatively, the 4-hour time frame paints a more bearish picture. By connecting the highs of April 30, May 11, and May 19, it can be seen that the currency pair is testing resistance at the falling trendline. A bearish candle closing around 0.6513, below the last candle’s low, would effectively form a bearish engulfing candlestick. This is widely considered as a bearish confirmation signal. If there are enough sellers in the market, we could see AUDUSD soon fall to support at the bottom of what looks like a symmetrical triangle at 0.6416.