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The Aussie danced to the tune of developments in China this week. Will this week’s set of top-tier reports inspire retracement for the Aussie pairs?

RBA’s meeting minutes

In its statement a few days back, the Reserve Bank of Australia (RBA) kept its policies steady as market players had expected. In fact, the event turned out to be a snoozer because the central bank didn’t really offer anything new at the time.

And as if that wasn’t enough to put you to sleep, RBA Governor Philip Lowe also reminded us last week that he and his gang don’t’ see anything that that would make them change their policies anytime soon.

Unless we see more details or surprises from this week’s minutes, then traders will likely pay more attention to China’s data releases at the time of the release.

March jobs numbers (April 19, 1:30 am GMT)

Employment reports didn’t work out well for the Aussie last month. See, job gains missed its estimates in February while January’s gains were revised lower. What’s more, the job gains were mostly from part-time jobs!

Though a higher participation rate eased the sting a little bit, it still wasn’t enough to deter the bears from attacking.

This week market players see the unemployment rate improve from 5.6% to 5.5% in March. In addition, they estimate that around 20,300 workers had found jobs compared to the 17,500 figure in February.

The RBA usually mentions Australia’s robust jobs market in its reports, so you can bet that Aussie traders will be watching one. Make sure you are, too!

Overall risk sentiment

As you can see below, the Australian dollar has reacted positively to China maybe easing up on its trade war threats. Not only that, but it has mostly ignored a hawkish FOMC statement in favor of extending its gains.

Can the Aussie find more support from this week’s market themes? Watch out for any headlines that might affect risk sentiment and demand for high-yielding bets for this comdoll!

Last Week’s Price Review

The Aussie is the third best-performing currency of the week (as of 6:00 am GMT), behind only the Loonie and the Kiwi, its fellow comdolls. The Aussie only barely lost out to the Kiwi, though, so the Aussie’s ranking could still improve.

Overlay of AUD Pairs & Gold (Black Line): 1-Hour Forex Chart
Overlay of AUD Pairs & Gold (Black Line): 1-Hour Forex Chart

Looking at the overlay of AUD pairs and gold prices above, we can can see that the Aussie took some directional cues from gold.

However, there were also very clear instances when the Aussie diverged from gold prices, which means that gold wasn’t the only driver of the Aussie’s price action. So, what were the other drivers?

Well, there were a bunch of things, and most of them had to do with China. And if you’re a newbie who’s wondering what China has to do with Australia (and AUD), well, that’s because China is the main destination for Australia’s commodity exports.

Anyhow, the Aussie got slapped lower early on, thanks to a Bloomberg report that claimed that China is supposedly studying the possibility of devaluing the yuan “as a tool in trade negotiations with the U.S.,” as well as to tool to “offset the impact of any trade deal that curbs exports.”

This report took a toll on all the comdolls, but the Aussie took the brunt of it. And as explained in Monday’s London session recap, a weaker yuan means Australia’s exports become relatively more expensive, which will weaken demand for Australian exports. And remember, China is Australia’s main export market.

Fortunately for the Aussie, the Greenback weakened, gold prices rose, and risk sentiment persisted during Monday’s U.S. session, giving the Aussie a broad-based boost.

Gold later began to dip during Tuesday’s Asian session, but that didn’t matter much for the Aussie since traders had their sights on Chinese President Xi Jinping’s speech.

And as noted in Tuesday’s Asian session recap, Xi Jinping talked about further opening up China’s economy. And one such plan is to “significantly” lower import tariffs for products including autos, increasing imports, lowering foreign-ownership limits on manufacturing, and expanding protection to intellectual property.

That caused the Aussie to spurt higher across the board. Although follow-through price action was a bit more mixed since Xi Jinping’s speech also ramped up demand for the other comdolls. Still, most Aussie pairs continued to get bid higher. And it likely helped that gold also began trending higher later on.

The Aussie’s rally finally began to lose steam by Wednesday, likely because the rise in gold prices also began to stall.

However, gold later resumed its rise but the Aussie got behind as selling pressure began to build up. And Aussie bears were apparently enticed to jump in when China’s latest CPI report failed to meet the market’s expectations.

More Aussie bears were likely enticed to come out of the woods when RBA Guv’nah Lowe gave his speech since Lowe repeated the RBA’s message that:

“The Reserve Bank Board does not see a strong case for a near-term adjustment in monetary policy.”

In short, don’t expect a rate hike anytime soon, which likely disappointed some rate hike junkies.

Anyhow, gold continued to rise and that apparently allowed the Aussie to recover some of its losses on most pairs. Although gold prices would drop later after the FOMC minutes were released. Risk-taking was the name of the game during Thursday’s U.S. session, though, which is likely why Aussie pairs were mostly steady.

The Aussie later felt some selling pressure after a Chinese Commerce Ministry spokesman said that “If the United States takes any action to escalate the [trade war] situation, China will not hesitate to fight back.”

After that, the Aussie’s price action became a mixed mess before becoming uniform again when the Aussie caught a bid on Friday. Gold was on the rise, but as noted in Friday’s Asian session recap, the risk-on vibes and China’s strong import data likely drove the Aussie higher.