The Australian Dollar took a breather against the US Dollar on Tuesday, with AUD/USD trading close to 0.7212 during Asian hours after a four-session winning run came to a halt. The pause followed the release of China's August trade figures, a closely watched data point given how much Australia's economy leans on trade with Beijing.
China's trade numbers land close to forecasts
China's Trade Balance for August printed at $119.09 billion in US Dollar terms, arriving almost exactly in line with the $119.1 billion figure economists had penciled in, and comfortably above July's reading of $112.5 billion. Exports climbed 25% year-over-year in August, matching expectations and accelerating from July's 23.9% pace. Imports, meanwhile, grew 28.2% year-over-year, a touch softer than the 30% forecast and slower than July's 27.5% expansion. Because China absorbs a large share of Australia's mineral and energy exports, the health of its trade engine tends to filter directly into how the Aussie is priced.
Weak consumer mood drags on the Aussie
Even as the China data offered little to unsettle traders, a domestic report did more damage. The Westpac Consumer Confidence index sank 5.2% to 84.4 in September, wiping out most of the 6% jump to 88.9 that had been recorded in August. That swing in household sentiment weighed on the Australian Dollar and is the main reason AUD/USD slipped back after four straight days of gains.
A soft US Dollar keeps the pair from falling further
Losses in AUD/USD are being cushioned by broader weakness in the US Dollar. HSBC has flagged that the greenback's recent stabilization shouldn't be mistaken for a fix to its underlying problems, cautioning that concerns "could still return and weigh on the dollar yet again" even though near-term sentiment has improved. The bank's analysts continue to point to worries over the sustainability of US government finances as the structural issue underpinning that caution. At the same time, expectations that the Federal Reserve could still deliver a rate hike in September are giving the Dollar some underlying support, creating a tug-of-war that has kept AUD/USD largely rangebound rather than trending sharply in either direction.
Yen strength and RBA bets add to the backdrop
AUD/USD has also been trading not far from its highest level since May 14, helped along by a rallying Japanese Yen that has overshadowed the Dollar's support from hawkish Fed bets and ongoing geopolitical tensions. Firming expectations that the Reserve Bank of Australia will deliver another rate hike later this month have acted as an additional tailwind for the Aussie, even as the mixed nature of China's trade release has kept the pair's advance in check.
Where the pair could head next
On the charts, the original technical picture pointed to initial support at the nine-day Exponential Moving Average near 0.7187, with the 50-day EMA at 0.7094 seen as the next cushion should a deeper pullback take hold. Should that floor give way too, more distant structural support levels sit at 0.6688, 0.6434 and 0.6348, though those would only come into play if the current bullish structure broke down significantly.
The latest session data shows AUD/USD changing hands at 0.7212, up 0.08% from the previous close of 0.7206, and sitting inside a 52-week range of 0.6422 to 0.7277. The 14-day Relative Strength Index reads 67, and the MACD line is running above its signal line in bullish territory. The pair trades above its 20-day, 50-day and 200-day Exponential Moving Averages of 0.7145, 0.7090 and 0.6935 respectively, with the 50-day average sitting above the 200-day average in what chartists call a golden cross, a setup generally associated with an established uptrend. The Average Directional Index stands at 20, signalling the trend is weak or rangebound for now, while the Stochastic oscillator's fast line at 88 versus a signal line of 89 suggests the pair is trading in overbought territory. On the Bollinger Bands, price is sitting inside the 0.7045 to 0.7240 range with a midpoint of 0.7142. Near-term support is placed around 0.7045 and resistance around 0.7226, with the day's pivot point at 0.7216, resistance levels at 0.7222 and 0.7232, and support levels at 0.7205 and 0.7199.
