The Australian dollar has done reasonably well all thing considered and given that the first real shots are about to be fired in President Trump's trade war.
Yes, I know, plenty of folks are saying this is not a war and all that. We can argue about that in a year or two. But lets at least agree that this is a fight the President has been itching for, for decades it seems. That needs to be the context around the new tariffs that go into place when the clocks tick to the new day in the US and Steel and Aluminium imports attract new costs structures.
And it's the fight the President wanted over NAFTA too with the Canadians and Mexicans both imposing tariffs on US exports in retaliation.
Does it escalate?
No would seem to be the verdict of the market if the price action of US stocks and the Aussie dollar are any guide.
At 0.7568 the AUDUSD is only around a quarter of a cent below the high of the past 24 hours. But the 90/95 region as a zone traders tried for the best part of 12 hours to best without success. So it is fair to say that the range top has held for the moment.
And well it might given the net result of this trade skirmish/battle/war is, as I wrote in Markets Morning today and St Louis Fed President James Bullard said in a speech this morning, is increased uncertainty.
That is poison to business decision making, it's poison to household consumption decisions, it can also be poison to national political landscapes, and ultimately the aggregate of these uncertainties is a negative on individual country and global growth.
And that is never good for the Australian dollar.
So against this backdrop the Aussie - indeed risk assets more broadly - are doing okay right now. Mostly because most folks seem to think this is just a Trump negotiating position.
It may or may not be. What happens with China and Wilbur Ross' negotiations will help determine the market response.
And as a result that will determine the backdrop against which the AUDUSD sits.
Non-farm payrolls in the US tonight and GDP soon in Australia are also important as well.
For the moment though the charts suggest the Aussie remains in the upper part of the range it's been trading in. But in the range nonetheless.
The overnight high of 0.7593 was unsustainable after 12 hours of trying to break through while the 0.7550 region looks like important support if I look at the past days trade on the 4 hour charts. The daily candle is indecisive so a move below 50 would accelerate while a topside break likely needs a much weaker USD to push higher.
Have a great day's trading.
Chief Market Strategist
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