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Overall risk sentiment and trade war rhetoric dragged the Aussie to another losing week last week. Will it see new catalysts this week?

If it does, then that catalyst hasn’t shown up yet. With no top-tier economic report scheduled in the Land Down Under, it looks like the Aussie will be at the mercy of risk sentiment for another week.

Watch out for escalating threats between Washington and Beijing this week. See, tariffs on $50 billion worth of goods are expected to go live on July 6 and word around the hood is that it’s unlikely for both parties to reach a deal by then.

Trump has threatened to slap tariffs on another batch of goods if China implements its July 6 set. Will we hear more about it this week?

Last Week’s Price Review

The Aussie is turning in yet another poor performance this week (as of 6:00 am GMT), which would mark the third week of net losses for the Aussie.

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 above, we can see that gold traded lower this week. However, we can also see that the Aussie didn’t really track gold prices that closely. In fact, the Aussie even very clearly diverged from gold on Tuesday.

So, what drove the Aussie even lower this week? Well, risk sentiment and trade-related news pretty much helped to drive the Aussie’s price action.

Overlay of AUD Pairs: 1-Hour Forex Chart
Overlay of AUD Pairs: 1-Hour Forex Chart

The higher-yielding Aussie began encountering sellers right from the start, thanks to the risk-off vibes on Monday. And even more sellers attacked when Trump threatened to impose even more tariffs against China as retaliation to China’s retaliatory tariffs.

The Aussie also got slapped lower when the RBA’s meeting minutes were released, likely because the RBA removed its forward guidance that:

“[M]embers agreed that it was more likely that the next move in the cash rate would be up, rather than down.”

And that implies that the RBA may be shifting to a more neutral monetary stance. Although it’s worth noting that RBA Guv’nah Lowe did say last week that the RBA still has a hiking bias while also stressing that:

“Any increase in interest rates, however, still looks to be some time away.”

Moving on, risk aversion also persisted on Tuesday, which likely helped to push the Aussie even lower.

Moreover, the Greenback was getting buyers at the time, which likely also applied bearish pressure on the Aussie. And the Greenback was strengthening back then, apparently because Former U.S. Treasury Secretary Lawrence Summers said in an interview that:

“Trade war is not likely to be large enough that its direct effects damage the economy profoundly.”

Aussie pairs then eventually began to tilt higher after Chinese Foreign Ministry Spokesperson Yan Shuang stressed during a presser that (emphasis mine):

China does not want to fight a trade war, but it is not afraid to fight a trade war. It will continue to take effective measures to resolutely safeguard national interests and the interests of the people and resolutely safeguard economic globalization and the multilateral trading system.”

Yan Shuang was also asked about Trump’s threat to impose even more tariffs and Yan Shuang implied that China is reluctant to escalate the trade spat with the U.S. even further when he merely said the following:

“[W]e advise the United States to return to rationality and stop deceitful actions against others.”

Also, risk sentiment eventually began to improve, which likely helped to provide support for the Aussie as well.

Risk aversion did begin to show signs of returning by Wednesday’s London session, though, so the Aussie also took a step back before becoming a bit more more mixed.

Most Aussie pairs did have a  noticeable upward tilt as of Friday, though, likely because of weakness on the part of the Greenback and signs that risk appetite was returning.