AUD/USD gathers strength above 0.6400 amid optimism in US-China trade talks

AUD/USD edges higher to around 0.6420 during the early Asian session on Monday. Optimism in US-China trade negotiations in Geneva, Switzerland, boosts the Australian Dollar against the Greenback. Traders will keep an eye on positive developments that could support the China-proxy Aussie.

AUD/USD Technical Overview

The AUD/USD pair recovers initial losses and rises above the key level of 0.6400 during European trading hours on Friday. The Aussie pair bounces back as the US Dollar (USD) retreats from almost a month high posted earlier in the day, with investors turning cautious ahead of the United States (US)-China trade discussions over the weekend.

Fundamental Overview

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, turns upside down after facing selling pressure near 100.85.

Earlier this week, US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer said that they will meet their Chinese counterparts in Switzerland on Saturday, aiming to de-escalate the trade war. The meeting between them is expected to be more about lowering additional duties imposed by both nations on each other, and not about negotiating a trade deal.

Signs of improving trade relations between the US and China would be favorable for both nations, given that the Asian giant is the second-largest exporter to the US.

Positive outcome from trade talks between worlds’ two largest powerhouses will also be favorable for the Australian Dollar (AUD), given the strong reliance of Australia on its exports to China.

Earlier in the day, the US Dollar performed strongly due to the announcement of the US-United Kingdom (UK) trade deal and guidance from the Federal Reserve (Fed) that there is no rush for interest rate cuts.