AUD/USD struggles for upside momentum ahead of US-China trade deal signing

Technical Analysis

Author: Justin Low | audusd

The lack of catalysts from the aussie side of the equation isn't helping

AUD/USD D1 14-01
The pair has had a bit of a mixed day so far, inching higher to 0.6910 before falling back to 0.6885 and is staying a little weaker now amid a pullback in yields during the session.

That said, price is still keeping above the 200-day MA (blue line) @ 0.6891 but buyers unable to extend gains towards the 0.7000 level as seen in late December.

For trading this week, it's all about the risk mood and how markets will react to the US-China Phase One trade deal signing. In general, market conditions are keeping more steady besides the bit-part hiccup seen in the European morning today.

That leaves a lot to be desired for AUD/USD - especially if you look at the near-term chart:

AUD/USD H1 14-01
The past two trading days have seen price action settle in between the key hourly moving averages with gains continuing to be capped by the 200-hour MA (blue line) as well as the 38.2 retracement level @ 0.6919.

Meanwhile, any downside move remains supported by the 200-day MA highlighted above @ 0.6891 as well as the 100-hour MA (red line) @ 0.6884 for the time being.

For the remainder of the week, be wary of any major fluctuations in risk sentiment - particularly in the aftermath of the US-China trade deal signing. Any sell-the-fact play may result in added weakness for the aussie in the near-term.

But on the flip side, if China does commit to a hefty amount of purchases of US goods over the next two years, you can bet that they will not want a weaker yuan in trying to achieve that. The aussie may well be an indirect beneficiary of a stronger yuan in that case.

Looking further out, the key risk factor for the pair will be the RBA meeting on 4 February.

As such, traders will have to wait on next week - 23 January to be exact - for more of a clue, where we will get the latest Australian labour market data. After that, there is also the Australian CPI data on 29 January to look forward to.

Those will be two key risk events for the aussie in the run up to the RBA meeting next month and will have a big say about market pricing for domestic bond yields and in turn, the aussie - since both pretty much run hand in hand over the past few years:

AUD/USD vs yields

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