Daily Market Recap - AUDUSD

The Aussie dollar rose against the US dollar on Thursday after strong economic data from both Australia and China encouraged further risk-on trading sentiment. The pair is up nearly 1.50 percent at the time of writing, correcting from the downward slump seen yesterday.

A stronger than expected Chinese trade balance widened to 45.43 billion USD in April, significantly above the consensus estimates of 6.35 billion USD. Furthermore, analysts were surprised to see Chinese export figures increase by 3.5 percent year over year as expectations were set for a 15 percent decrease.

Factories in China have reopened after a lengthy lockdown period and likely have a large backlog of orders to process. The encouraging sign of a swift recovery in manufacturing combined with an uptick in demand from Southeast Asia is prompting investors to take a more aggressive stance on the Aussie dollar.

China being Australias largest trading partner, positive economic developments in China typically boosts the Australian dollar. A strong indicator of the recovery in Chinese manufacturing is given by the increase in commodity imports, with iron ore imports up by 22 percent in April on an annual basis.

From a technical perspective, the AUDUSD has crossed over the previous resistance point set by the 0.786 Fibonacci level at 0.64280. The pair will likely close above that level with bulls targeting the previous weeks high around 0.6545. On the flip side, the 0.63521 price point should serve as a strong support zone.

(Chart Source: Tradingview 07.05.2020)

Traders should pay attention to the price action at the pivotal point of 0.64 for signs of sustained buying pressure. Tomorrows US non-farm payroll figures will likely add further volatility to the markets.

Should the figure come in above expectations, we may see a downward correction on the AUDUSD.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.