Increased demand for risk is helping to fuel a recovery in the Australian and New Zealand Dollars early Tuesday. Helping to generate the rebound in the Aussie and Kiwi is the reversal in China’s major stock indexes.
Early in the session, China’s Shanghai and Shenzhen indexes traded lower in response to the plunge in the Dow Jones Industrial Average on Monday. However, the Chinese markets began to strengthen shortly after the open and investors were able to hold on to these gains into the close. By the end of the session, the Shanghai composite rose 0.93 percent to close at 2,654.88 while the Shenzhen Composite advanced 1.628 percent to about 1,383.92.
The catalyst behind the early strength in the Aussie and Kiwi as well as the global equity markets is hope for progress in the US-China trade dispute. According to a report, China’s Vice Premier Liu He will visit the U.S. to pave the way for a meeting between the leaders of the two biggest economies later this month at the G20 Conference in Argentina.
Additionally, speaking in Singapore, Chinese Premier Li Keqiang said China and the U.S. will find a solution to their differences over trade that meets both countries’ common interests.
Despite the long-term pressure from the divergence between the monetary policies of the hawkish U.S. Federal Reserve and the dovish Reserve Banks of Australia and New Zealand, it looks as if the positive trade news about the U.S. and China is likely to drive the price action on Tuesday.
Both the Aussie and Kiwi are getting close to recovering all of yesterday’s losses. If the upside momentum continues, the AUD/USD could rally into at least .7252. The NZD/USD could make a run at .6799, followed by .6818.
Look for a strong tone today as long as demand for risk continues to drive U.S. equity markets higher. Furthermore, continue to monitor the news for additional information on a possible meeting between the U.S. and China. The news suggests that the meeting between Trump and Chinese President Xi Jinping in Argentina on November 30 – December 1 could possibly bring the US and China closer to ending the trade dispute.
This article was originally posted on FX Empire
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