AUD/USD Upward Channel - U.S. China Trade War Plays!
The AUD/USD pair was closed at 0.66236 after placing a high of 0.66799 and a low of 0.65671. Overall the movement of AUD/USD pair remained bearish throughout the day. The optimism about the recovery from coronavirus was balanced with the increased tensions between the U.S. and China after the latest comments from U.S. Secretary of State. Hong Kong became the new flashpoint when Mike Pompeo on Wednesday declared that it was no longer consider as autonomous territory by the U.S. administration.
China and the United States have been fighting against each other on many terms, out of which one was the Hong Kong issue. China has repeatedly warned the U.S. to not interfere in its internal matters, but the U.S. has not stopped meddling in China's affairs, which led to the escalated protests in Hong Kong against the Chinese government.
To manage the rebellion, terrorist, and separation activities in Hong Kong, China imposed a new security law in Hong Kong, which will be presented before the Parliament for approval on Thursday. Ahead of that, the U.S. announced it would retaliate, and in late Wednesday, it declared Hong Kong as no more autonomous land from China.
The heightened tensions between the world's biggest economies also spilled over the Australian dollar because of its relationship with the Chinese Yuan. The United States has crafted a range of options to punish China over its tightening grip on Hong Kong, which included sanctions, tariffs, and restrictions on Chinese companies from the U.S. stock market.
The Chinese Yuan, which is a barometer of US-China relations, hit a record low of 7.2966 per dollar on the late session of Wednesday and weighed on Aussie.
Aussie came under pressure and broke its two-day bullish streak on Wednesday and started to decline and post losses. Now markets are awaiting a response from China over the declaration of Washington, and Aussie traders will keep a close eye on it because of the direct relationship between Aussie and Yuan.
However, the tension between Australian and China over the COVID-19 pandemic was still in the market. On the other hand, the Richmond Manufacturing Index from the U.S. for May came in as -27 against the expectations of -40 and supported the U.S. dollar. The U.S. Dollar Index on Wednesday remained steady at 98.86.
Daily Technical Levels
Pivot Point: 0.6623
The upward channel in the AUD/USD pair continues to keep the pair supported above 0.6580 level while the pair continues to face resistance around 0.6625 area. On the higher side, the violation of resistance level may lead to Aussie prices further higher until the next resistance level of 0.6670. The RSI and MACD continue to exhibit the buying trend in the AUD/USD pair. Let's consider taking buying trades over 0.6623 and selling below the same today. Good luck!