Australian Dollar Outlook

Now that AUD/USD has returned to the levels it was trading at prior to the covid outbreak, market participants must decide if the current landscape constitutes a continuation higher, or if the recovery has become overbought and a retracement is in store. Either way, it would appear the shorter-term performance of the Australian Dollar is closely tied to broader risk sentiment as it has declined alongside recent pullbacks in the Nasdaq 100 and S&P 500.

 In between exists an ascending trendline from the March 19 low, but recent price action suggests it has lost some influence and may act as a minor technical level going forward. Therefore, it may be prudent to keep an eye on developing fundamental themes and event risk as AUD/USD awaits a longer-term trend. If either of the highlighted areas are pierced, it may suggest a continuation in that same direction is ahead.

The recovery continued when Trump confirmed on his personal Twitter account that the “China trade deal is fully intact” and added that he is hopeful China “will continue to live up to the terms of the agreement.” Meanwhile, President Trump, in addition to several other White House officials, have recently noted the possibility of a ‘complete decoupling’ from China, in an apparent escalation in Sino-America trade war rhetoric.

The Australian market is gaining confidence again however the number of cases increasing in Victoria is a concern, Victoria records Covid-19 as 20 new cases reported and Melbourne at risk of second lockdown. Eight of the most recent 20 Covid-19 Victorian cases are from community transmission, Professor Brett Sutton says, bringing the total cases identified as being from community transmission to 241.


Gold Outlook 

Gold prices climb to the highest since 2012, because most commodities are priced in dollars, a softening buck can make those assets more attractive to buyers using alternate monetary units. Global PMI readings on Tuesday, meanwhile, pointed to a quicker economic recovery from the coronavirus pandemic, contributing to the stock gains.

Monetary stimulus from global central banks, including the Federal Reserve, and extremely low or negative interest rates for the foreseeable future, also helped to raise the appeal of precious metals that do not offer a coupon. 

Gold price as at 24 June 2020 is AUD $2,553.70 per ounce / USD $1771.50 per ounce


China Outlook 

Stock rises after Trump reaffirms China trade deal and Disney will close its language schools in China, citing changing habits caused by the pandemic. The Walt Disney Company has decided to close Disney English, a 12-year-old chain of 25 language schools in China, ending a once-promising business that, at times, prompted questions about education as brand building.

The escalating tensions between Beijing and Washington are turning into a gift for Hong Kong stock traders, offering them easy access to the fastest growing part of China’s economy.

The transition to listings in Hong Kong will leave local traders with more choices to invest in among the mainland’s burgeoning industries – such as e-commerce, mobile gaming and artificial intelligence – and reshape the landscape of the city’s stock market, according to Jefferies Group and China Renaissance Holdings. It will also cement Hong Kong’s status as one of Asia’s top markets. It is already Asia’s third-largest stock market after China and Japan, with a capitalisation of US$5.2 trillion.

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