Aussie Recovers On Fresh US-China Trade Talks, Job Data

Aussie Recovers On Fresh US-China Trade Talks, Job Data
September 13, 2018

 

The Australian Dollar took off this morning on reports of an amicable agreement that is close to being realized in the ongoing US-China trade issue. The Wall Street Journal has reported that the White House is contemplating on a fresh round of trade-related negotiations with China.

 

China-US trade talks and economic data boost Aussie

According to the Wall Street Journal report, top US officials, headed by Treasury Secretary Steven Mnuchin, has sent an official invitation to their counterpart, suggesting an elaborate meeting in the upcoming weeks to negotiate on trade-related issues.

US officials have also requested the ministerial-level team from China for negotiations. The place of discussion has not been decided but is likely to take place in Washington or Beijing. Neither government has issued an official comment in this regard.

The Australian dollar is the prime victim of the brewing trade war between China and the US. The country is heavily dependent on China for export revenue. Without Chinese imports, the Australian iron ore and coking coal industry would come to a standstill. Both these commodities are the top two export revenue earners for Australia.

The news has come at a time when the market was nervously expecting another round of sanctions worth $200 billion by the US administration on Chinese goods. Such an announcement could have taken the Aussie to new yearly lows against the greenback. However, the unexpected positive development has resulted in a bullish reversal.

Commenting on the US invitation, Marc Chandler, economist and currency strategy head at Brown Brothers Harriman, said: “AUD jumps on news of new US-PRC trade talks. AUD at 3-day highs.”

Reports of a possible solution to the China-US trade issue has eased risk tensions, leading to the weakening of the US dollar and other safe-haven currencies.

 

Australian job market news

In addition to political news, the Australian dollar has also received a boost today from the employment data reported earlier today.

The Australian Bureau of Statistics reported an unemployment rate of 5.3% in August, unchanged from the previous month and in line with market expectations.

By adding 44,000 jobs in August, the economy surpassed analysts’ forecasts for an increase of 18,000. Notably, the economy lost 3,900 jobs in July.

Similarly, full-time employment rose with 33,700 to 8,630,700, while part-time employment figures were at 4,000,600, an increase of 10,200 from last month.

Even though unemployment grew by 5,800 to 708,800, the total number of unemployed people scouting for full-time work declined by 7,500 to 494,800. The number of unemployed people looking for part-time employment was 214,000, an increase of 13,200 from the earlier month.

Furthermore, the participation rate was 65.7%, exceeding expectations of 65.6% and increasing from 65.5% in the earlier month. More importantly, the underutilization rate declined 0.4 points to 13.4%. Additionally, the labor force underemployment rate fell by 0.3 pts to 8.1%.

The improvement in sentiment, created by the renewed China-US trade talks and strong job data, has turned the Aussie bullish for the short-term.

Technically, the AUDUSD pair has found support at 0.7080 as shown in the image below. The RSI indicator is in the oversold region. The next significant resistance is only at 0.7720. Therefore, we are expecting the AUDUSD pair to remain bullish in the short-term.

AUD - technical analysis - 13th September 2018

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Sammy

Sammy

Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world


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