The improvement in the Business Confidence and Business Conditions in May highlighted by the National Australia Bank’s survey released at 01:30 GMT did not impact AUD/USD positively.

National Australia Bank’s index of business confidence rose to -20 in May 2020 from -46 in April and compared to market consensus -32. The latest reading remained below the long-run average, with the figure last seen around the 1990s recession. Business conditions improved but remained negative (-24 vs -34 in April), also improvement in sales (-18 vs -31), profits (-19 vs -35) and employment (-31 vs -34) were noted. Manufacturing, construction, and retail saw rises between 11-16 points, while finance, business & property, and transport & utilities saw fewer gains. The services sectors remained weaker than the other industries. Meantime, capacity utilization rose, but remains historically low.

Restless relationship between close trade partners China and Australia has a major impact in Aussie. China accused Australia of endorsing racial discrimination against Asians. In a speech to Australian Broadcasting Corp (ABC) radio on Monday, the Trade Minister of the country Simon Birmingham said that it is very disappointing that China is not acting to its weeks-long pleas to ease tensions between the two trading partners. Birmingham said: “Unfortunately, our requests for a discussion have so far been met negatively. That’s disappointing.”

Tension between the two counties developed when Australia called for an international inquiry against China, concerning the origin of the corona virus. As a response to Australia, China suspended beef imports from four of Australia’s largest meat processors and imposed hefty tariffs on imports of barley.

AUD/USD 4 Hour Chat:

Support: 0.6978 (S1), 0.6936 (S2), 0.6910 (S3).

Resistance: 0.7045 (R1), 0.7071 (R2), 0.7113 (R3).

The Business improvement highlighted in the National Australia Bank’s index did not create a favorable situation for AUD amid Australia China tension. We expect a bearish trend for the pair.