The aussie rides greater on Trump’s tariffs pause however can it final?

Trump relenting on his position on tariffs was received positively yesterday and risk trades benefited as a result. That said, he stepped up the rhetoric against China and that is a still a key issue that markets need to be watching out for in the meantime. Both sides are still not coming to the negotiating table and that could inflict pain to the global economy in the meantime.

And usually what is bad for China is almost also always bad for the Australia, because of their trade reliance. But surprisingly even with the yuan devaluation, the aussie is taking everything in stride over the last 12 hours or so.

AUD/USD is now up 0.5% on the day to 0.6185 following the surge higher overnight. It comes even as we see both the steep tariffs from US and China come into effect today.

Adding to that, is Australia’s position now that they don’t want to align with China in this whole episode. Australia’s defence minister, Richard Marles, said today that “we’re not about to make common cause with China – that’s not what’s going to happen here”. It is a direct rejection to Chinese ambassador to Australia Xiao Qian’s offer to “join hands” against the US.

If anything, that’s a setback to Australia-China relations again after years of trying to mend the relationship.

Looking to the chart though, AUD/USD is starting to creep back above its 200-hour moving average (blue line) and that shows buyers in near-term control now. The 0.6200 mark will offer up some resistance in the short-term but the fundamentals are also worth considering as there are reasons stacked against the aussie at the moment.