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AUD/USD bulls get a relief; China to the rescue

FXStreet (Guatemala) - AUD/USD is trading at 0.8699, up 0.81% on the day, having posted a daily high at 0.8725 and low at 0.8605.

AUD/USD is well out of the danger zone at the end of this week’s session with a spike up onto the 0.87 handle and out of reach of the local forces dragging on the pair into highly negative territory below 0.8600. The pair had been tipping over into the high 0.85’s and bears were licking their lips for lower grounds yet, but China came in to save the day for the time being.

China cut 1 year lending rates by 0.4 and the 1 year deposit rates by 0.25 to 2.75% to help bolster the economy and they are also raises the deposit ceiling to 1.2 times of benchmark from 1.1 times to give banks more freedom to set deposit rates. All will take effect as of 22nd November.

On the back of this, commodity currencies have taken off and the Aussie climbed over a cent. Australia rely heavily upon China, as announced by RBA’s Heath – the head of economic analysis, when speaking at a mining industry conference overnight. However, the knee jerk reaction may only be what it is and Heath was another RBA official to recently voice and repeat how the Aussie is trading above fundamental value.

The question now stays with the US and as to whether the dollar can sustain a full on rally in a global environment rife with disinflation and slower growth, which may negatively impact the US. In the latest set of FOMC minutes, caution in this respect was documented and rate rises may not come as soon as markets had been anticipating. Yields have even been struggling to rise on the back of strong US data of late.

AUD/USD noteworthy levels

With spot trading at 0.8699, we can see next resistance ahead at 0.8708 (Daily 20 SMA), 0.8708 (Weekly Classic PP), 0.8725 (Daily High), 0.8737 (Daily Classic R3) and 0.8759 (Weekly High). Support below can be found at 0.8690 (Daily Classic R2), 0.8685 (Hourly 200 SMA), 0.8664 (Hourly 100 SMA), 0.8660 (Daily Classic R1) and 0.8650 (Hourly 20 EMA).

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