The Australian dollar is paired with the US currency again after a three-day steady growth. "Aussie" is approaching the key support level of 0.7000, which remains an irresistible outpost for the AUD / USD bears. The main reason for reducing the pair was the news that Beijing and Washington could not agree on all points of the future trade transaction, so the meeting of the leaders of the PRC and the US is postponed at least to April.
It should immediately make a reservation that this information is of an informal nature: this was reported by American journalists with reference to anonymous sources. But the market rightly decided that "there is no smoke without fire," after which anti-risk sentiment among traders increased significantly. The dollar index also moved away from local minima, as greenback began to enjoy increased demand. Investors need an "island of security" where they can wait out a period of uncertainty. The dollar, in this case, plays the role of a defensive asset, so its position has recovered markedly throughout the market.
But the commodity currencies, which include the Australian dollar, have significantly sunk. The New Zealander, the Canadian dollar and the Norwegian krone - all of these currencies today in one way or another show a negative trend. This is understandable because we are talking about the risk of resuming a large-scale trade war, which will aggravate the already difficult situation in the global economy. Australia in this context is "at the forefront of the attack," since China is the country's main trading partner, and the further economic downturn of the Middle Kingdom will have a strong negative impact on key Australian indicators. Moreover, the head of the Reserve Bank of Australia at the last meeting of the RBA separately focused on this, not excluding the option of lowering the interest rate. Therefore, in this case, we are talking not only about the prospects for US-China relations but also about the prospects for Australian monetary policy.
The news that negotiations between Beijing and Washington are "stalling" did not become a revelation for traders. Recently, the market began to receive alarming signals that indirectly pointed to existing problems. In particular, at the beginning of this week, US sales representative Lighthizer acknowledged that "significant differences" still remain between countries. He also stressed that Donald Trump will not sign the agreement if he considers it "insufficient or impracticable." Summarizing what was said, Lighthizer noted that he could not talk about any predictions and deadlines for the completion of negotiations.
It is worth recalling that a few weeks ago, the press called the indicative date and even the venue for the meeting of the leaders of the United States and China. The final dialogue was to take place on March 25-27 at the estate of the American leader Mar-a-Lago in the state of Florida. Now this date has been postponed indefinitely: according to an unnamed source, the meeting may not take place at all if the parties do not find a common sign on controversial issues. The consequences of such a scenario are not difficult to predict: countries will once again return to a state of the trade war, increasing pressure. According to one expert, China can take a defensive position until the next presidential election in the United States (which will be held on November 3, 2020) in the hope of losing Trump.
In other words, the prevailing fundamental picture does not contribute to the strengthening of the Australian dollar, but, on the contrary, pulls it to the bottom. The southern dynamics of AUD / USD is also due to today's release of Chinese data, which turned out to be in the "red zone". It is about changing the volume of industrial production in the PRC. After the growth in December to the level of 5.7%, in January a slight decline was expected - up to 5.5%. However, the result was worse than expected: the indicator dropped to the level of 5.3%, reflecting a slowdown in industrial activity. Considering the previous news about the breakdown of the "big truce" between China and the United States, this factor played a decisive role relative to the current dynamics of the Australian dollar.
Thus, short positions in the pair AUD / USD are still relevant - any attempt to grow (even large-scale) can be considered as an excuse to go into sales. At the same time, it is worth remembering that now the price is very close to the key support level. In this case, it is advisable to observe the behavior of the pair at the base of the 70th figure. If the bearish impulse dies away, then a corrective pullback will probably follow (approximately to 0.7105, that is, to the upper line of the Bollinger Bands indicator on D1), which nonetheless cancels the overall southern trend for the pair.
