Originally published by AxiTrader
Will we get an escalation or de-escalation from the Chinese side of this trade and tariff battle when President Xi addresses a forum in Boao this morning?
To say this is the big event for the day is no understatement.
The question is does Xi take on the belligerent tone of the Chinese State Media recentlyor does he strike a balance between protecting Chinese interests and recognising that China does have some wiggle room on tariffs and IP.
Already in the past couple of weeks his deputy Premier Li, has made both those points.
But fresh from gaining preeminence within the Chinese political system as the leader for life I wonder where Xi might go and what he might say given this is his first real test. I also wonder if the situation with Taiwan may also play into his mind when he decides what to do.
And whichever way that is President Xi is likely to have an impact on risk assets like the Aussie dollar, and of course stocks and growth commodities.
Any hint of either conciliation or belligerence is likely to have an impact in trading after lunchtime today.
With that in mind it is worth looking at the Aussie dollar overnight in which it had a bit of a wild ride. Relatively anyway given it traded down toward the bottom of the recent range back above 77 cents overnight.
Importantly, however, the context around that move is the 20 day average true range is currently running at 59 points – roughly the range of AUD/USD over the past 24 hours. So, I would simply say there is no information in the Aussie’s price action save for one very important point. The lows held again. Which is actually important.
The release of the NAB business survey today might change that. Coming of record highs in conditions with solid levels of confidence, trading, profitability, and employment intentions there is a risk of a pullback in the NAB’s survey. But as we’ve seen in some of the industry PMI’s so far this month it’s more likely the strength in the business sector has been maintained. That’s bullish for the Aussie with the US dollar under pressure.
But as the globes deepest and most liquid forex growth and risk proxy what president Xi says today and how that filters into sentiment, stock market price action, and risk appetite or aversion, is likely to be far more important. The levels I’m watching today are 0.7640/50 and 0.7720 then 40. A break of either 40 will really get things moving.
Here's the daily AUD/USD chart.
And on that other great risk proxy - the AUD/JPY rate we are at an interesting junction as well.
A break of the recent high at 82.64 could see a run to the 38.2% retracement of the recent down move from 89 which comes in at 82.74. A failure at 82.64 opens a move back to recent lows around 80.46.
Plenty of room for President Xi to have an impact there.
Have a great day's trading.