The uptrend continues. The escalation of the trade war between the US and China puts pressure on the Chinese economy, and therefore there is a risk of a decline in exports to China, which will have a negative impact on the economies of exporting countries, including firstly Australia.
This week investors preferred to invest in the Euro. The EU is sidelined from the trade conflict. So despite the slowdown and decline in business activity in the Eurozone, the EUR is considered the most stable currency, if a mildly risky asset, at the moment. Economic statistics, at the same time, do not please investors, except for achieving the inflation target level of 2% in August, which allows the ECB to talk about positive dynamics in the EU's economy.
In the absence of a news background, Australia was completely dependent on the trade conflict between the US and China, which was developed this week with the introduction of new mutual duties. This certainly affected the cost of raw materials, which also negatively affects the AUD. For investors, the Australian dollar has become a kind of indicator for assessing risks in trade with China. The AUD value is steadily declining and the EUR/AUD quotes have easily reached their highest level for the last 9.5 years. The EUR was more expensive against the AUD only in January 2009.
Given the forecast for the development of the trade conflict between the US and China, we can say for sure that there would be a continuation of the uptrend in favor of the EUR, while the Australian dollar is remaining under pressure and in the absence of positive data on the economy of Australia, the consolidation is not expected. The situation could be corrected by the intervention of the RBA, but the supporters of a soft monetary policy will not take this step. In this situation, we can confidently talk about the efficiency of the deals on the trend in the near future, which is also confirmed by the Stochastic oscillator.
