AUD/USD makes a move above 50-day MA on trade optimism, AU-US yield spread rises

• Trade optimism seems to have pushed the AUD above its 50-day moving average. 
• The Aussie dollar could rise further on speculation the global industrial cycle is on the verge of picking up. 
• AU-US 10-year yield spread has risen 10 basis points in AUD-positive manner. 

AUD/USD moved above the 50-day moving average (MA) of 0.7118 a few minutes before press time and is currently trading at the session high of 0.7125.

The Australian currency is gaining altitude in Asia, seemingly due to US-China trade optimism.  White House economic adviser Larry Kudlow said Wednesday that the two countries made good headway in Beijing last week. Further, news hit the wires earlier today that China's Vice Premier Liu He, who is in Washington for trade talks, will meet President Trump at the White House later today.

While both sides appear to be closing on a trade deal, a sticking point remains: What happens to the existing US tariffs on China after a deal is reached. Further, both sides are yet to agree on the terms of an enforcement mechanism.

The uptick in the Aussie and the overnight gains in the US stocks, however, indicate that markets are confident the remaining hurdle will be resolved.

Looking forward, the AUD could continue to rise as upbeat Chinese PMI numbers released earlier this week have triggered speculation that the global industrial cycle is on the verge of picking up. Australian macro data - retail sales and trade figures - released yesterday also veered to the positive side.

Validating the bullish case in the Aussie dollar is the spread between the Australian and US 10-year government bond yield, which is currently up 10 basis points from the low of -0.68 seen yesterday.

Technical Levels