AUD/USD extended its rally to six-week highs, but the growing bullish sentiment still faces difficulty as U.S.-China trade tensions return to center stage. Technicals deepened already bullish sentiment as AUD/USD broke above the daily cloud top and RSIs provided a tail wind. But the path higher is hindered by a significant obstacle: U.S.-China trade tensions. Though the U.S. election may stifle some Trump initiatives, such as fiscal stimulus, trade policy with China is likely to remain an issue.
The Democrats may lean toward maintaining trade pressure on China Click here
If trade issues boil over, the aussie will struggle to rally as it remains a key proxy for global trade.
Post-election price action in USD/CNH could be a key indicator that trade tensions will remain a big concern. The dollar has lost ground versus the yuan today but the decline was meager compared to its fall against most currencies. AUD/USD could test the 200-DMA as well as resistance at 0.7360/80 and 0.7480/90, but gains beyond that could be difficult.
chart: Click here