AUDUSD broke above its multi-month trendline yesterday and closed above on a much larger than expected trade surplus and also Chinese gov report they will support the economy with aggressive stimulus in a "do what ever it takes" approach. This positive news comes at a time when Asia Pac FX is extremely bearish and oversold without much in the way of relief.
Trade surplus is important for AUD as roughly 30% of Australian GDP is exports (quite a high percentage) making Australia an exporting nation. A trade surplus actually adds value to the GDP. The report showed how exports had risen 1% and imports fell by 1%. The surplus expected to be A$1.8Bn came in north of A$3BN with the prior revised higher too!
In China, Australias largest trading partner purchasing 30% of all Aussie exports, the government announced plans, although not yet specific, to use aggressive fiscal stimulus to stabilize the economy. This comes as a reaction to a slowing economy and falling stock market. Keep in mind tariffs havent even had much of a hard impact yet, as Chinese companies front run the impact of tariff the underlying economy is likely worse than the numbers suggest.
Slowing China is the reason for AUD sell off since beginning of year, so China gov decision is net positive for Asia - Pac currency. Hense the 2% move higher y'day for AUD, squeezing out short sellers coupled with USD weakness, but AUD & NZD were higher across the board.
Overnight, Sources claim that Trump says he is working with cabinate to plan a trade deal with China which added to AUD gains over night, improving risk sentiment, sending the USD sharply lower and equities higher and bonds lower, but as always Gov officials came out few hours later dismissing the claim.
On that basis looking to swing the AUD long, but only in the short term, playing a relief rally... i think longer term as of jan time next year, depending on US-China tensions, depending on Tariffs, midterms and general commodity price index, AUDUSD & NZDUSD continue to move lower.
Set up is a pullback to retest the broken trendline as support, fib50 and the 7150 handle and play the bounce up to 23Sep high & 73 handle. Risk to reward isnt great on this trade, roughly 3 to 4: 1 depending on stop size.
Trade surplus is important for AUD as roughly 30% of Australian GDP is exports (quite a high percentage) making Australia an exporting nation. A trade surplus actually adds value to the GDP. The report showed how exports had risen 1% and imports fell by 1%. The surplus expected to be A$1.8Bn came in north of A$3BN with the prior revised higher too!
In China, Australias largest trading partner purchasing 30% of all Aussie exports, the government announced plans, although not yet specific, to use aggressive fiscal stimulus to stabilize the economy. This comes as a reaction to a slowing economy and falling stock market. Keep in mind tariffs havent even had much of a hard impact yet, as Chinese companies front run the impact of tariff the underlying economy is likely worse than the numbers suggest.
Slowing China is the reason for AUD sell off since beginning of year, so China gov decision is net positive for Asia - Pac currency. Hense the 2% move higher y'day for AUD, squeezing out short sellers coupled with USD weakness, but AUD & NZD were higher across the board.
Overnight, Sources claim that Trump says he is working with cabinate to plan a trade deal with China which added to AUD gains over night, improving risk sentiment, sending the USD sharply lower and equities higher and bonds lower, but as always Gov officials came out few hours later dismissing the claim.
On that basis looking to swing the AUD long, but only in the short term, playing a relief rally... i think longer term as of jan time next year, depending on US-China tensions, depending on Tariffs, midterms and general commodity price index, AUDUSD & NZDUSD continue to move lower.
Set up is a pullback to retest the broken trendline as support, fib50 and the 7150 handle and play the bounce up to 23Sep high & 73 handle. Risk to reward isnt great on this trade, roughly 3 to 4: 1 depending on stop size.