AETOS Market Commentary
Australian dollar, a proxy for Chinese economic prospects, hit a high of 0.7017 after news of a positive trade compromise surfaced, however closed under 0.7000. There is still significant caution in the markets and the same tone may continue this week as investors wait for further optimism.
Considering the news last week, risk has actually traded better than expected as seen by the price of the AUD/USD, with money flowing towards risk-off currencies it never really continued to make a sever dent in AUD prices. Much confidence can be taken from this, however we are yet to see the promised retaliation from China.
While U.S. President Donald Trump on Friday said he was in no hurry to sign a trade deal with China, negotiators reported progress in the discussions as they wrapped up a second day of talks (Reuters).
Lastly, the U.S. reported their consumer prices on Friday and in April they rose to 2% from 1.9% the previous month, but core inflation remained as predicted, suggesting the Fed could keep interest rates unchanged for a while longer.
Fundamental data this week is thin, local releases start today with minor Housing data being released from Australia followed by Confidence surveys by NAB and Westpac tomorrow and Wednesday respectively.
AUD/USD Daily Chart
RSIs remain neutral and the pair cannot break free of the 50 Fib of 0.6715-0.7295 or the 0.7000 area. The pair continues down the channel, somewhat hugging the lower line and threatening a break deeper, however, a monthly doji candle increases the indecisive sentiment. Signals are not clear so utilize the ATR when setting S/L and T/P levels.
On Friday, the USD ticked up against the safe-haven Japanese yen to a high of 110.0 from a low of 109.46, eventually closing at 109.46.
There is hope for a U.S.-China compromise as Treasury Secretary Steve Mnunchin told reporters that talks were constructive while Chinese Vice Premier Liu He, China’s country's lead negotiator, told reporters in Washington that the talks had gone "fairly well," Bloomberg reported.
At this stage, there is no clear deal in sight so further talks are expected and since tariffs were increased on Friday, the U.S. are in no rush to force a deal, with the urgency firmly placed on the Chinese.
To recap, Trump's tariff increased to 25% from 10% on $200 billion of Chinese goods kicked in on Friday, with Beijing stating a strike back is imminent.
USD/JPY Daily Chart
Oversold downtrend finds a foothold at 109.47 for a second day, but recoveries remain weak and further losses are probable. The Feb 1 low and 161.8% Fibo off the 112.40-111 drop target the 108.73 level. Oversold daily RSI continues to trigger a potential rebound, however, the pair is in a battle of the ‘safest’ currency as investors may choose to back the JPY as they have throughout last week.
Major Economic Events happening this week (AEDT Time Zone)
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