The Australian dollar continues to climb

Oli Scarff/Getty Images
  • The Australian dollar continued to climb on Monday, adding to Friday’s substantial gains.
  • A breakthrough in trade negotiations between the United States and Mexico helped to drive gains in risk assets, including the Aussie.
  • The economic calendar is quiet in Asia, likely ensuring sentiment will be dictated by the performance of Chinese markets, especially the yuan.

The Australian dollar continued to climb on Monday, adding to the stellar gains achieved on Friday.

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

AUD/USD 0.7346 , 0.0022 , 0.30%
AUD/JPY 81.59 , 0.21 , 0.26%
AUD/CNH 4.9910 , 0.0143 , 0.29%
AUD/EUR 0.6290 , 0.0002 , 0.03%
AUD/GBP 0.5697 , 0.0001 , 0.02%
AUD/NZD 1.0961 , 0.0032 , 0.29%
AUD/CAD 0.9523 , -0.0021 , -0.22%

As the scoreboard suggests, the Aussie had another good session, finishing flat-to-higher against all major currencies aside from the Canadian dollar.

News of a trade breakthrough between the United States and Mexico was a major factor behind the move, helping to support risk assets such as stocks and most commodities, as well as the Aussie.

“Risk sentiment was given a further leg up overnight with the news that the US and Mexico had agreed on a trade deal to replace NAFTA,” said David de Garis, Economist at the National Australia Bank.

“Sticking points over the automotive sector have been resolved while duty free access for the agriculture sector.”

Joseph Capurso, Senior Currency Strategist at the Commonwealth Bank, said while it is not clear whether the agreement updates or replaces the long standing North American Free Trade Agreement (NAFTA), it does highlight the US is willing to compromise to reach an agreement on trade.

“The willingness to compromise will be warmly greeted by governments in Canada, China and Europe,” he said.

The trade breakthrough saw the US dollar weaken across the board, including against the offshore traded Chinese yuan, helping to underpin the Aussie’s gains during the session.

The AUD/USD closed the day at .7350, moving closer to technical resistance located above the .7380 level.

Just two days ago, it sat at .7235.

Investing.comAUD/USD Hourly Chart

Given the lift in sentiment towards trade negotiations on Monday, movements in the Chinese yuan look set to dictate the direction of the Aussie dollar again on Tuesday given a dearth of economic data and events across the Asian region.

There’s next to nothing with those releases that are scheduled unlikely to interest traders, clearing the way for Chinese markets to dictate sentiment.

Later in the session, the economic events calendar picks up a little with monetary supply growth from the Eurozone, French consumer confidence, along with house prices, Richmond Fed manufacturing index, wholesale inventories and the goods trade balance for July from the United States, the headline acts.

The latter two releases, in particular, could be influential given the implications US Q3 GDP.

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