The Australian dollar rally has run out of puff

Vince Caligiuri/Getty ImagesMELBOURNE, AUSTRALIA – MARCH 19: Dwayne Dunn riding champion sprinter Chautauqua refuses to jump again during Cranbourne Barrier Trials on March 19, 2018 in Melbourne, Australia.
  • The Australian dollar fell modestly on Tuesday, succumbing to profit taking following two days of solid gains.
  • Strategists at the NAB put the weakness down to disappointment over progress in trade negotiations between the United States and China.
  • All of the major economic events on Wednesday arrive in the second half of the session, headlined by the second release of US Q2 GDP.

The Australian dollar fell modestly on Tuesday, succumbing to profit taking following two days of solid gains.

Here’s the scoreboard as at 7am in Sydney.

AUD/USD 0.7337 , -0.0013 , -0.18%
AUD/JPY 81.57 , -0.07 , -0.09%
AUD/CNH 4.9904 , -0.0032 , -0.06%
AUD/EUR 0.6273 , -0.002 , -0.32%
AUD/GBP 0.5699 , -0.0001 , -0.02%
AUD/NZD 1.0934 , -0.0039 , -0.36%
AUD/CAD 0.9484 , -0.0039 , -0.41%

After rallying across the board since Friday, the Aussie slipped against all major crosses, failing to benefit from improved investor sentiment as a result of a trade breakthrough between the United States and Mexico.

Rodrigo Catril, Senior FX Strategist at the National Australia Bank, put the weakness down to disappointment that a breakthrough in trade negotiations between China and the United States still appears to some way off.

“The AUD has essentially traded sideways, after reaching an overnight high of 0.7362, the Assie now trades at 0.7337, 0.18% lower to its level this time yesterday,” he said in his morning note.

“[The] weakness can be largely attributed to a delay reaction to President Trump remarks denting expectations of a quick trade resolution with China.

“Yesterday Trump said that he doesn’t see a quick end to trade tensions with China. US Commerce Secretary Wilbur Ross reinforced this view overnight, noting the US was focused on sorting out trade agreements in ‘our own neighbourhood’ before moving onto China.”

As seen in the hourly chart below, the AUD/USD lost ground in the latter part of the session, impacted by the remarks from Ross as well as a raft of US economic data that was largely positive sans a blowout in the goods trade deficit in July.

Investing.comAUD/USD Hourly Chart

Turning to the day ahead, it looks set to be another quiet one with little on the economic calendar in Asia.

Australian new home sales and Japan consumer confidence are the only releases of note and neither will be of interest to traders.

As has been the recent days, the quiet calendar points to the likelihood that the performance of Chinese financial markets, particularly the yuan, could prove influential on the Aussie.

The data calendar will pick up in the second half of the session, headlined by the second release of US Q2 GDP.

The economy is expected to have grown 4% in seasonally adjusted annualised terms, down from the preliminary estimate of 4.1%.

Outside of that release, other data highlights include the second reading of Q2 French GDP, German consumer confidence as well as US pending home sales.

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