AUDUSD saw a volatile start to today’s trading as the US-China trade deal came into focus. The currency pair got aggressively sold-off when news about the US-China trade deal being off the table hit headlines. This was triggered by remarks by US trade adviser Peter Navarro when he said that the deal with China is over.
AUDUSD fell from its intraday high of 0.6934 to 0.6857. The currency pair is widely known to be a barometer for risk. This is because the Aussie has traditionally enjoyed higher interest rates compared to the other major currencies. And so, it tends to be more sensitive to market sentiment, that is, it gets sold off on risk aversion and trades higher on risk appetite.
However, the currency pair retraced its losses when officials reiterated that the agreement between the two countries is still valid. US President Donald Trump tweeted that the US-China trade deal is still intact despite Navarro’s earlier comments. As of this writing, AUDUSD is trading at 0.6920.
It’s also worth pointing out that data from Australia also showed improvements in the manufacturing and service sectors today. The manufacturing PMI for June printed at 49.8 which is higher than the reading for May at 44.0. Meanwhile, the services PMI tapped into the expansion territory at 53.2, significantly higher than May’s 26.9 figure.
On the 4-hour time frame, a descending triangle becomes apparent when you connect the lower highs from June 9 and the steady lows from June 12. While this chart pattern is widely considered as bearish (because of its lower highs), an upside break would be considered as a bullish indicator. With that being said, it’s worth pointing out that the last candle closed above the falling trendline. This could mean that there are buyers in the market who are looking to push price to its most recent highs at 0.7040 where it topped on June 9.
Alternatively, a close below today’s low at 0.6857 could mean that what we’re seeing is nothing but a fakeout. Strong bearish price action could mean that there are still sellers in the market. AUDUSD could then retest support at the bottom of the triangle at 0.6809.