The rates continue within a downtrend. Despite optimism about the perspective for a deal between China and the US, the situation is unlikely to change until a treaty is actually signed. Moreover, the AUD will need a deal that is beneficial primarily for China, because the Australian economy, which is in a state of recession, needs strong incentives and a change in the external background.
Meanwhile, there is less optimism among investors. According to the latest information, negotiations can be delayed until the end of the year and in January, due to the New Year holidays, so we will likely be without a deal at least until the spring. Given the growing contradictions between China and the United States, the current round of negotiations may be disrupted altogether because of the US support for anti-government demonstrations in China. Therefore, there is every reason to assume that the negative background for the AUD will continue at least until the end of the year.
The economic situation in Australia also does not contribute to the strengthening of the Australian dollar, and according to the minutes published this week, the RBA is ready to cut the rate further. The latest economic data also show a decline in business activity in the manufacturing sector to the lowest level in the last 3.5 years; the situation on the employment market is also disappointing.
The US economy looks relatively stronger. Recent macroeconomic reports are multidirectional. Nevertheless, there are good perspectives, given the growth of the Philadelphia Fed's manufacturing index, and also the Fed minutes and their positive assessment of the US economy, to refuse to revise the rate in the foreseeable future.
In this situation, we believe that the deals on the trend will be more effective, and most technical analysis tools, including the Stochastic and MACD oscillators, also confirm the efficiency of short trades.
