The Australian dollar (AUD) has shot higher straight out of the gates today following the news out of China that it is considering lifting a ban on coal imports from Australia. The Aussie dollar is strongly linked to developments out of China, as China is a big buyer of raw materials from Australia.
As a result, the local currency, the AUD, has surged across the board today. It gained more than 2% against the USD, outperforming all G10 currencies.
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The coal exports to China could resume as early as April. Therefore, traders bought the Australian dollar in anticipation of what is seen as a reopening of the Chinese economy after the COVID-19 policies.
AUD/USD coiling in an ascending triangle
The AUD/USD pair started the new trading year on a weak tone. Yesterday, it dropped on a strong debut for the US dollar in 2023.
However, today’s news triggered a sharp reaction in the opposite direction. As such, the exchange rate erased all of yesterday’s losses and some more.
From a technical perspective, things look bullish too. An ascending triangle is visible on the daily chart, with the current price action pushing against horizontal resistance.
The news out of China might be just what was needed for the triangle to end. An ascending triangle is a bullish continuation pattern with a measured move equal to the triangle’s longest segment. In this case, the measured move suggests a movement above 0.7 might be in the cards sooner rather than later.
Later in the trading week, the Non-Farm Payrolls report for December 2022 will be released in the United States. Should the market view the report as bearish for the US dollar, then the AUD/USD exchange rate is on track to gain some more, given the developments in China and the relative lack of liquidity in the FX market.
Source: https://invezz.com/news/2023/01/04/australian-dollar-surges-across-the-fx-dashboard-on-china-news-time-to-buy/