AUD under pressure, really?

AUD under pressure, really?

The medium term outlook for the AUD is likely to weaken if the US-China trade dispute grows. This is because Australia is the most China dependent major developed economy and tensions have been mounting between the two countries.

China is the largest export market for Australian barley. In China it is used to make beer, feed livestock, andChina imported 2.5m tonnes of barley from Australia in the last financial year. Chinese tariffs are likely to bring significant pain to the industry. According to the Australian grain industry they issued a statement that the new tariffs.

"It is estimated this dispute could cost Australian grain industry and notably rural and regional economies at least $A500m per annum,"

This move is in addition to import bans on Australia's beef shipments and looks set to weigh on the AUD. Furthermore, increasingly aggressive posturing from China and the US means further trade disputes seem almost inevitable now, Any action by either party would weaken the AUD.

Positive vaccine news nearly priced in?

With 20+ companies working on vaccines or treatments for COVID-19 the good news of a vaccine is increasingly becoming 'priced in' and this will make the market more sensitive to negative US-China/China- Australia trade news. Looking at the AUDJPY pair it is rejecting its 200DEMA and that would be a near term place to limit risk as it is also a key pivot point on the daily chart.

However, be aware that if President Trump's promised actions against China, due to be announced today, are seen as gentle or only rhetorical then AUD can still rise on the global growth recovery hopes. The 200DEMA on the daily chart provides a near term cross roads.