AUD/USD inches lower as buyers run out of steam near the 200-day moving average
The aussie is the weakest performing major currency on the day
AUD/USD made its way higher during the start of the week on the back of a stronger Chinese yuan ahead of trade talks but also as the dollar weakened following the FOMC meeting on Wednesday. Higher iron ore prices also played a part in keeping the aussie underpinned but price is now backing off after having failed to really test key resistance at the 200-day MA (blue line) near 0.7300.
Since overnight trading, the aussie has been weak and Chinese PMI figures earlier certainly didn't help with that regard, nudging the aussie lower on the session.
Right now, price is running back into the 76.4 retracement level @ 0.7239 with further support then seen closer to the 0.7200 handle. The 100-hour MA sits at 0.7206 so that will be a key support level to keep an eye on as we look to wrap up the week.
As mentioned yesterday:
"The 200-day MA would be a good place to scale out on longs before reviewing the pair again. Right now, it's all about how far the weakness in the dollar will go."
With EUR/USD slipping back below 1.1500 and the greenback holding the lines against potential technical breaks in other pairs as well such as AUD/USD above and USD/CAD below the 200-day MA, evidently markets are still not convinced by further dollar weakness and will be waiting on further clues/validation from the jobs report later.
However, as I argued yesterday, the jobs report may provide some temporary headwinds/tailwinds towards gauging dollar sentiment so don't expect that to last. The more prominent driver will be the conclusion of trade talks and how close a trade deal will be.
That said, I'm not too optimistic on the dollar's outlook either regardless of how trade talks progress:
"The outlook for the dollar now will hinge on US economic data in my view and also how trade talks will develop. I reckon the latter may have a huge say in where the dollar ends up in the coming weeks. Positive news will likely see markets jump to risk assets and that could precipitate some weakness in the dollar. On the flip side, negative news will feed into the current rhetoric that it will continue to eat at US economic growth and that will also be seen as dollar negative."
But as long as markets are kept in limbo - like they are now - then the dollar should still be supported and not falter just yet.