AUDUSD draws some sellers as a decent increase in demand for the USD on Monday.
During the Asian session, the AUDUSD pair breaks a three-day winning streak by slipping back below the psychological 0.6500 mark, beginning a new week or month on a lower note. Furthermore, there is a chance that the recent downtrend that has been going on for the last two months or so will resume given the fundamental background.
Concerns about the US-China trade war also drive flows away from Australia.
Fears of a second round of the US-China trade war following the inauguration of US President-elect Donald Trump in January weakens the Australian dollar (AUD), which is a proxy for China, and pushes some haven flows towards the US dollar (USD). Trump has actually promised to impose significant tariffs on China, Canada, and Mexico—America’s top three trading partners. Additionally, Trump threatened to impose a 100% tariff on the countries known as “BRICS”—Brazil, Russia, India, China, and South Africa—should they switch from using the US dollar to another currency for cross-border transactions.
The USD supported by bets for slower Fed rate cuts, which raise US bond yields.
A new spike in US Treasury bond yields also triggered by the market’s growing belief that Trump’s tariff plans could raise consumer prices and prevent the Fed from loosening its monetary policy. In addition, ongoing geopolitical threats from the protracted conflict between Russia and Ukraine help the safe-haven USD recover from a low of almost three weeks. touched on Friday. This does little to help the Australian dollar and overshadows the Reserve Bank of Australia’s (RBA) hawkish stance.
NBS Non-Manufacturing PMI decreased to 50.0 during the reported month from 50.2 in October.
The NBS Non-Manufacturing PMI decreased to 50.0 during the reported month from 50.2 in October, while China’s official Manufacturing Purchasing Managers’ Index (PMI) increased marginally to 50.3 in November from 50.2, according to data made public over the weekend. Furthermore, China’s Caixin Manufacturing PMI increased from 50.3 to 51.5 in November. Investors are also still optimistic that the government will increase stimulus to support domestic demand. However, this doesn’t impress bulls or give the AUDUSD pair any relief.
Although traders may choose not to trade, the fundamental backdrop mentioned above indicates that the path of least resistance for spot prices is downward from making risky wagers before the start of a new week’s important US macro data. The ISM Manufacturing PMI, which could affect the USD and give traders the chance to seize short-term opportunities, the first item on this week’s packed US economic schedule. However, everyone’s attention still fixed on Friday’s Nonfarm Payrolls (NFP) report, which is the most anticipated US jobs data.
