The Australian dollar at the end of last week updated more than two-year price minimum. For the last time, the pair AUD / USD was at the base of the 71st figure in February 2016. Positive dynamics of growth of the Australian economy had a temporary support for the "Aussie" and on Friday, it completely crossed out all the achievements of the pair's bulls.
First of all, the Australian yielded to the dominance of the US currency, which rose in price throughout the market due to the strong enough Nonfarm. The probability of raising the rate to 2.5% at the December meeting rose to almost eighty percent, while full confidence in the September increase remained unshakable. This week (Thursday), the US consumer price index will be published. If traders see positive dynamics here, the chances of a December increase will increase even more, and, accordingly, the US dollar will get another reason for its further strengthening. It should be noted that preliminary forecasts are very optimistic. Experts expect minimally, but still growth relative to the previous period.
The successes of the American economy coincided with another fundamental factor, which also supports the demand for the greenback. This is a threat of an escalation of the US-China trade war. Trump on the last day of the last week again voiced threats to Beijing. This time, he said he intends to impose duties on almost all Chinese imports to the States, to the amount of $ 267 billion, in addition to 200 billion, which are also just under development.
In other words, he threatened to impose tariffs on virtually all imports from the PRC, but his threats are only verbal in nature. Nevertheless, the belligerent rhetoric did its job. The yuan started to become cheaper again, and on Monday, it opened with the northern gap, like most commodity currencies. The Australian dollar is no exception. A weak attempt at corrective growth is currently undergoing a fiasco, the bears are aggressively pushing the pair to test the key level of 0.70.
The positive dynamics of Chinese inflation also did not help bulls AUD / USD. This indicator came out better than expected, being at the level of 2.3%. In other words, the indicator has been growing for the third month in a row. But the market actually ignored this fact. This is due to two factors.
First, the index of production prices (PPI) remains at low levels, which indicates a fall in domestic demand. Secondly, the growth of August inflation in China is temporary. According to experts, the increase is due to a jump in prices for vegetables and meat (in particular, pork). In turn, the cost of these goods has grown because of natural disasters in some Chinese provinces. Floods in these regions have affected food supplies, especially vegetables. Obviously, such factors are temporary and will not be able to support the growth of inflation on a stable basis. That is why analysts agree that in September the consumer price index may return to the region of 2-2.1%.
In other words, the growth of Chinese inflation could not support the Australian, while another indicator, the surplus of China's trade balance with the US, aroused serious concern among investors. This indicator jumped in August to a new record high. The surplus increased to $ 31.05 billion, which is significantly higher than the last record amount, in July, the surplus was $ 28 billion. Such a result presages a new round of the trade war between Washington and Beijing. Threats sounded by Trump confirm such a possibility.
Given the above factors, it is not surprising that the shares of mining giants (Rio Tinto and BHP Billiton) have fallen by more than one percent today. As soon as Trump's intentions acquire real features, the commodity market will again show negative dynamics, exerting a strong influence on the Australian dollar.
As you can see, the external fundamental background dominates the domestic success of the Australian economy. The country's GDP growth has provided temporary support to the pair, as well as inflationary dynamics. Therefore, do not expect to release data on the Australian labor market (scheduled for Thursday). Despite strong forecasts, it will not change the situation and break the trend. Only the de-escalation of the trade US-China trade war can unfold the price movement.
From the technical point of view, the situation is as follows. At all timeframes, the pair AUD / USD is on the bottom line of the Bollinger Bands indicator under all lines of the indicator Ichimoku Kinko Hyo, which formed a strong bearish signal "Line Parade". This indicates the clear advantage of the southern movement. Bearish momentum is so strong that it is too early to speak about price correction: only if the data on the growth of American inflation will go far worse than expectations, the bulls of the pair can expect a minimal price retracement. Otherwise, the priority will remain for the south. The main goal of the southern movement is at the lows of 2016, that is, in the middle of the 69th figure. But the 0.7000 mark will become the main barrier for bears AUD / USD in the coming days.
The material has been provided by InstaForex Company - www.instaforex.com