AUD Cautiously Eyes Chinese Data Ahead of Sino-US Trade Talks

Australian Dollar, New Zealand Dollar, Chinese Economy Outlook, Coronavirus – TALKING POINTS

• Australian, New Zealand Dollars recoiled with crude oil prices and stocks

• Markets eyeing upcoming Sino-US trade talks as tensions continue to swell

• AUD/JPY uptrend could break as pair approach stubborn inflection range

Stock markets had a mixed day with the Dow Jones and S&P 500 index closing 0.29% and 0.20% respectively, while the Nasdaq clocked in a modest 0.27 gain. The energy sub-categories in the former two indices led the way in losses, specifically under “Oil & Gas Equipment & Services”. Some notable firms to note that posted losses for the day were Haliburton, (HAL) and Baker Hughes Co (BKR).

Crude oil was also down for the day, but the commoditys decline failed to drag the petroleum-linked Norwegian Krone and Swedish Krona with it. The latter in particular got a tailwind after Nordic economists said the economic contraction may not be as severe as they had anticipated. The Euro rose after Washington agreed to not impose tariffs on $7.5b of European goods amid the legal dispute of illegal subsidies to Airbus.

The commodity-linked Australian and New Zealand Dollars – especially the latter – were the session‘s biggest losers while the Greenback traded mixed. Early on in the day, better-than-expected US employment data showed initial jobless claims at under 1 million before sentiment turned sour and reversed the day’s gains. Uncertainty about macro-fundamental risks like US-China relations may be slowing the rise in equity markets.

Fridays Asia-Pacific Trading Session

NZD and AUD may curb their losses if Chinese industrial and retail sales data show better-than-expected figures and boost regional risk appetite. Having said that, traders may not be too keen on committing capital ahead of US-China trade talks in August. A myriad of policy issues ranging from tech to foreign policy approaches to Iran may ooze their way into the discussions and cast a dark shadow over future relations.

AUD/JPY Outlook

Since bottoming out in March, AUD/JPY has risen along a multi-month support channel, though its strength is being tested as the pair brush up against a stubborn resistance range between 75.925 and 76.320. Failing to clear the multi-layered ceiling would lead to an invalidation of rising support, and this break could gather bearish momentum and drag the lower pair. The next 48 hours will be critical.

AUD/JPY chart created using TradingView