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AUD/USD Struggles to Maintain Bullish Momentum As August Trade Balance Disappoints

AUD/USD tries to gain upward momentum even as it takes support at 0.7100 levels, preventing the currency pair from breaking lower.

The Australian Dollar has moved lower with the President’s Covid-19 infection. Though it rallied to 0.72 levels on Tuesday, 6 October, it could not sustain gains and moved lower. However, bulls could not gain control over the AUD/USD currency pair as it managed to move towards 0.7140.

With less than a month to go for the US presidential election 2020, Joe Biden, the Democratic nominee is taking the lead. President Donald Trump’s infection with Covid-19 has brought down his standing in the polls. Political volatility is on the increase in the currency market.

Trade Balance reports continue to pour in from several countries. Trade balances have come down in Australia, the United States, and France. Germany’s trade balance, to be released on Thursday, is expected to be in the negative. In Canada, the trade balance continues to remain almost similar to last month. The first two weeks of October continues to be data-driven.

AUD/USD Moves Lower with August Trade Figures in the Negative

Australian Trade Balance has gone down from 4.60B in August to 2.64 billion in July. It is a far cry from the estimated 5.15 billion. Trade figures in August were not as expected. Exports went down 4%, while imports increased by 2% for the month. Exports in gold, iron ore and coal have increased.

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The AUD/USD currency pair saw a deep correction to 0.70 levels towards the end of September but recovered later. Tuesday was the day when bears took over the Australian Dollar movement as it saw a deep singe day correction.

The Australian Dollar has been moving in a wide range in October against the Japanese Yen. It has been see-sawing between the green and red candles for the past few days.

The AUD to US dollar rose to 0.7210 levels last week but slid lower. If it falls below 0.7135 levels, it would see a deeper move towards 0.7050 levels.

The Reserve Bank of Australia continues to hold its interest rate at 25bp.

AUD/USD Moves Lower


Germany’s Construction PMI has fallen in September from 48.0 to 45.50. Spain Services PMI has contracted from 47.7 to 42.4. German Final Services PMI is slightly better from 49.1 to 50.6.

Factory Orders m/m in Germany has been good. It has improved from 3.3% last month to 4.5% this month, though expectations were lower at 3.0%.

Retail Sales in the Eurozone has been good. While it was at -1.8% in the previous month, it has improved to 4.4% on a month-on-month basis.

The EUR/USD continues to find strong resistance at 1.18 levels. If it moves below 1.1725, it may see a fast downturn to gain support at 1.1650 levels. It has gained support at 1.1700 levels for the past six trading sessions.

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The Euro has shown great strength against the British Pound this week. The currency pair has moved up from 0.9050 levels to 0.9150 levels in three consecutive trading sessions. Currently, it is at 0.9133 levels on Wednesday, 7 October, at 2.40 pm GMT.

Rishi Sunak says it is a “matter of social justice” to protect employees in the hospitality sector, as he defends the fiscal support to the economy.

United Kingdom – GBP/AUD up

UK Construction PMI has improved from 54.6 to 56.8. Britain’s Final Services is slightly better from 55.1 to 56.1, much better than the expected 55.1.

The Sterling has moved positively against the Australian Dollar. The RBA move to keep rates unchanged has improved the Pound. GBP/AUD touched 1.82 levels last week. The pound continues to move with high volatility with the coronavirus cases increasing and the Brexit issue looming nearer.

Talks have been extended to another month, as agreed between UK Prime Minister Boris Johnson and EU Commissioner President Ursula von der Leyen.

US Dollar lower as trump halts talks

In the United States, Trade Balance has come down from -63.4B to -67.1B. The Final Services PMI remains unchanged at 54.6 in the United States. Trade Balance in the US touched a low of -68B in 2006. Auto sales in the US have seen a strong recovery in September. It has increased to 16.3 million, much better than the anticipated 5.7 million. In August, the sales number was at 15.2 million.

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Trade Balance in Canada remains almost the same at -2.4 billion, though expectations were at -2.1B. The employment report is expected on Friday.

The US Dollar tumbled on Tuesday towards the close, when the US President brought a halt to stimulus talks. Both the Dow and the Forex market saw a sharp downturn.

President Trump sends strong signals supporting payroll protection. It brought some relief to the US markets. The US Dollar Index zoomed up towards 93.90 levels during early hours of trading on Wednesday, 7 October. However, it moved lower to 93.65 levels hours later.

Wall Street’s indices, however, started with a 1% upmove on Wednesday, though President Trumps had put off stimulus negotiations.



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