AUDUSD
With virtually no domestic economic indicators for the week, the AUDUSD will look to the US-China trade talks for direction this week. Banks in China are observing the last day of the week-long independence celebration in the Mainland.
Markets closed for the week on Friday in risk-on mode. This was buoyed by optimism in the trade dispute as Treasury department officials dismissed rumors of delisting of Chinese company shares on US exchanges. Hopes of reaching a settlement remain high as US-China trade talks resume this week. On the back of risk-on sentiment, the AUDUSD ended Friday on a bullish note. AUDUSD presently trades at 0.6762, a tab below multi-year lows of 1998 and 2003.
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Australia is a net exporter of commodity-based raw materials such as copper, which feed the thirsty machines of China’s industries. AUDUSD finds itself in a unique position of acting as a trade proxy pair for economic news affecting China, as well as risk-on/risk-off scenarios. Risk-on sentiment boosts commodity prices, which is good for the AUDUSD. Risk-off sentiment is commodity-negative, which is bad for the Aussie Dollar.
As the US-China trade talks resume on Thursday, headlines from these meetings will determine the direction of Aussie Dollar trades.
Full information on what will be discussed is not yet available. However, there is market chatter that the Chinese delegation will not be discussing major issues of contention such as the rollback of subsidies it provides to make its companies more competitive globally. Washington has long complained that these subsidies give Beijing an unfair advantage in international trade.
A full trade deal is not expected in this round of meetings, but any form of temporary agreements on the less knotty issues will be viewed as a positive step in the right direction.