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AUD/USD awaits China CPI to take-out 0.6500

  • AUD/USD consolidates below 0.6500 amid fresh challenges to US-China trade relations.
  • US President Donald Trump says would not reopen trade talks (Phase 1) with China to relax terms.
  • Fears of the coronavirus resurgence also capped the otherwise upbeat trade sentiment amid economy re-open hopes.
  • China, CPI, Aussie NAB Business Confidence/Conditions decorates calendar, trade/virus updates also are the key.

AUD/USD struggles for a direction below 0.6500, currently around 0.6490, at the start of Tuesday’s Asian session. In doing so, the pair justify traders’ dilemma over whether to cheer the re-opening of major economies or afraid of likely increase in the coronavirus (COVID-19) cases. Also providing the background music are US President Donald Trump’s comments/attacks on China and the trade relations with it.

Is economic restart risky?

With the easing lockdown restrictions resulting in rising virus infections in Germany and increasing virus cases in the epicenter Wuhan, global traders are cautious about their previous optimism concerning the economic restart.

Germany registered an increase of 357 cases and 22 new deaths while Wuhan reported five new locally transmitted COVID-19 cases, the highest since March 11, per Reuters.

Fears are also gaining momentum as the major economies like the US and the UK are still to re-open and the same could push the respective leaders to delay the decision.

US President Trump and his dislike for China…

Despite agreeing over phase 1 of the trade deal in late 2019, US President Donald Trump hasn’t changed his mind for China and the virus outbreak increased his dislike for the dragon nation. In addition to his allegations that China is responsible for the pandemic, the Republican leader recently said not to reopen the phase 1 trade agreement to relax terms for China.

It should be noted that the US and Chinese policymakers talked over the phone on Friday and agreed upon communication and cooperation as per China’s Xinhua.

Elsewhere Fed policymakers are jostling to turn down market expectations of negative interest rates while also revealing fears of further weakness in employment data.

Risk-tone remains a bit firmer with Wall Street benchmarks closing in mixed and the US 10-year Treasury yields gaining around three basis points to 0.71% by the end of Monday’s North American session.

Looking forward, China’s April month Consumer Price Index (CPI) and Producer Price Index (PPI), coupled with Australia’s National Australia Bank (NAB) Business Confidence and Business Conditions, will provide fresh impulse. While Chinese CPI is expected to soften to 3.7% from 4.3% on YoY, PPI may drop further to -2.6% versus -1.5% prior. Further, NAB Business Conditions were -21 while Business Confidence was -66 in their latest releases in March.

Although China data might surprise to the upside considering the reopening in April, any downbeat outcome will extend the latest pullback.

Technical analysis

With the MACD and RSI losing momentum on the daily chart, buyers will wait for a sustained break above 100-day SMA, currently around 0.6540, to aim for April monthly top near 0.6570. Until then, odds favoring the pair’s pullback to 0.6415 support comprising 21-day SMA can’t be ruled out.

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