Buyers of the AUD/USD currency pair continue to siege the 72nd figure. In August, traders would test the 0.7200 price barrier almost daily but never managed to succeed. Last week, the pair's bulls managed to stay above the key resistance level for two days, but in the end, the price still bounced back. A similar situation was observed at the beginning of summer when traders could not overcome the price barrier in the form of 0.7000 mark. Then the buyers of the pair rescue the US dollar, which weakened throughout the market. Thanks to this factor alone, traders were able to step over the stubborn resistance level and settle in the area of the 71st figure.
At the moment, the situation looks more complicated: the US dollar is "afloat", and the pair's bulls have to rely only on the strengthening of the Australian dollar. Note that the Aussie in turn is under the pressure of its own problems, preventing it to move freely. Therefore, the AUD/USD pair has actually been marking time for three weeks, and the rare siege into the area of the 72nd figure are primarily due to the situational problems of the greenback.
On the one hand, the Australian dollar enjoys the support of the Central Bank: despite rising unemployment and weak inflation indicators, RBA members remain optimistic about the prospects for the national economy. At the last meeting of the Central Bank, Philip Lowe made it clear that in the foreseeable future the regulator will maintain a wait and see attitude. At the same time, the Central Bank acknowledged that due to the situation in Victoria (where the outbreak of coronavirus was recorded), the economic recovery process will be slower, relative to earlier forecasts. Nevertheless, the members of the regulator assured the markets that they are not going to adjust the parameters of monetary policy. The voiced position supported the Australian dollar.
On the other hand, the Australian dollar is under background pressure due to its current conflict with China. Canberra and Beijing bang pots and pan back in the spring, when, at the height of the pandemic, Australia became one of the initiators of the anti-China campaign, calling on the international community to conduct an independent investigation into the causes of the spread of the coronavirus. This proposal was supported by more than 120 countries of the world, but at the same time, it was extremely negatively perceived by China. Beijing accused Australia of "attacking China", after which the political conflict turned into an economic plane. The Chinese, in particular, have raised duties on certain types of Australian goods, while refusing to import beef. The Australian Foreign Ministry tried to organize a negotiating table with Beijing, however, China ignored such requests.
At the moment, the situation has not changed for the better. The conflict still smolders, and sometimes flares up with renewed intensity. For example, last week, the Chinese authorities announced that Australian wines were sold in the PRC at below-market prices and that exports were subsidized. In this regard, the Ministry of Commerce of China announced the launch of an anti-dumping investigation. In the spring of this year, a similar investigation ended with the Chinese authorities imposing duties on the supply of barley. Apparently, in this case, the same result can be expected. And here it is worth noting that Australia is the largest supplier of wines to China (the largest share of the imported wine market in China is more than 70%), therefore additional duties will have a negative impact on the Australian economy. In addition, immediately after the announcement of the Chinese Ministry of Commerce, shares of the Australian wine giant Treasury Wine Estates collapsed by 13%.
Australia also did not remain in debt: recently it became known that the Australian government may block the purchase of the Chinese company Mengniu Dairy Co Ltd, one of the most famous dairy brands in the country. It will be the first government veto since Australia announced the largest overhaul of its foreign investment law in 50 years. At the same time, quite recently, the Foreign Investment Council called for the approval of a deal worth $ 430 million. But then the situation changed dramatically, against the backdrop of political events.
Thus, the ongoing Australian-Chinese political conflict is putting background pressure on the Aussie, acting as a kind of anchor for the AUD/USD pair. Therefore, to consolidate in the area of the 72nd figure, the buyers of the pair need a powerful informational reason, which will weaken the position of the US dollar. For example, if the head of the FRS announces that the Fed will shift its inflation target to the average level during the economic symposium in Jackson Hole. Then the central bank will be able to allow inflation to rise above 2 percent before raising rates.
But there are still two days before the economic symposium, and until that moment, the AUD/USD pair will be trading in a given range. Any more or less significant price increase should be used as a reason to open short positions. Especially if buyers test the 72nd pattern again and move up to 0.7230 (upper line of the Bollinger Bands indicator on the daily chart). Selling can be considered with a target of 0.7120 - this is the lower line of the Bollinger Bands on the same timeframe.
