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- AUD rebounds in tandem with stocks as USD softens Wednesday.

- Stocks provide signals on U.S., global outlooks to risk-sensitive AUD.

- China's Micron investigation could signal nasty turn in "trade war".

The Aussie bounced out of an earlier trough Wednesday after international stock markets stabilised and as the safe-haven U.S. greenback softened.

Australia's Dollar, which is sensitive to movements in commodity prices, sentiments around the global economy and changes in investors' risk appetites, has taken its lead from U.S. stock markets this week.

U.S stocks fell Tuesday but S&P 500 and Dow futures turned higher in the early hours of London's Wednesday, pulling the AUD/USD rate in tow.

"The greenback correlations at the moment have switched to reacting to the ups and downs in global asset markets," says John Hardy, chief FX strategist at Saxo Bank. "Asian market stability has contrasted with the weaker markets in the US and Europe, so we come into today with the USD easing off the gas."

Stocks slumped Monday after the National Association of Home Builders (NAHB) Housing Market index fell to its lowest level since July 2016.

The NAHB index fell to 60 in November, down from 68 previously when markets had looked for a decline to only 67, as confidence about the business outlook among builders of new homes plummeted.

Respondents to the survey cited increased caution among home buyers, who the NAHB says are becoming more hesitant about purchases due to concerns over rising interest rates and the high level of home prices.

"The market is paying closer attention to US housing market data, which is typically considered a forward looking and interest sensitive sector of the economy," says Fritz Louw, a currency analyst at MUFG.

The NAHB's data merely added fuel to a preexisting fire that had been stoked by fresh concerns over the so-called "trade war" between the U.S. and China.

U.S technology stocks opened lower after the FT reported that Chinese authorities are investigating chipmaker Micron over alleged anti-competitive behaviour. This follows weeks of steep declines for the sector.

"It seems investors are trimming overweight tech positions into year-end, re-assessing the role of the US –China trade war," says Chris Turner, head of FX strategy at ING Group. "The Nasdaq 100 looks to be breaking down from a two year bull trend and warns of another 8% correction.

Big losses in global stock markets normally have an adverse impact on the commodity-backed Australian Dollar because of the signal such shifts often send about the U.S. or global economic outlook.

"Risk aversion and Sino-US trade concerns have weighed more heavily on AUD than NZD, the recent sharp slide in oil, base metals and bulk futures are also weighing on AUD. But today’s GDT surprised on the downside suggesting that global dairy demand may be faltering at the same time as NZ production is rising," says Richard Franulovich, head of FX strategy at Westpac.

Franulovich says the Westpac team are watching for an appropriate opportunity to buy the AUD/NZD rate, because they anticipate that the exchange rate tables will soon turn in favour of the Aussie, and against the Kiwi.

"AUD/NZD is testing rising support but could still flush toward 2018Q2 lows around 1.0500 if risk aversion continues. In the interim we watch this trade and opportunistically enter on either a flush below 1.0550 or a shift in risk aversion," Franulovich explains.

AUD/NZD was quoted -0.24% lower at 1.0602 Wednesday, while AUD/USD was 0.40% higher at 0.7244 and the Pound-to-Australian-Dollar rate was -0.22% lower at 1.7679.

The Antipodean was up against all G10 currencies other than the New Zealand Dollar Wednesday, but it remains to be seen how much longer positive price action continues for.

China's Micron investigation may have served to return investors' focus to the U.S. and China trade conflict, which has been a weight around the ankles of the Aussie this year.

Australia's currency is underwritten substantially by a mammoth stream of commodity exports to China so anything that impacts sentiment toward the world's second largest economy also tends to have an effect on the Aussie.

Presidents from both the U.S. and China are due to meet on the sidelines of the G20 summit this month and markets have been optimistic a deal to de-escalate the tariff fight can be reached ever since news of the talks first emerged.

But hopes have ebbed since the Asia-Pacific Economic Cooperation summit ended in farce, with no customary joint statement being delivered at the end, after U.S. and Chinese officials clashed with each other over trade rules.

President Trump has imposed tariffs on $250 billion of China's annual exports to the U.S., citing "unfair trading practices", and has threatened to target another $267 billion if the nation's leadership does not change course.

Technology is a hot-button issue in the trade war because Trump alleges that Chinese policymakers have enabled and assisted the "theft" of U.S. firms' intellectual property. There's also a long history of bilateral suspicion around technology.

Trump pledged that he would lift a ban preventing Chinese telecoms firm ZTE from selling equipment in the U.S. earlier this year, but his efforts to lift the ban were scuppered by Congress. That ban has led to severe financial hardship for ZTE, although it's not the first time Chinese tech firms have been blocked from entering or growing in the U.S. market.

The White House eventually prevailed in its bid to allow ZTE back into the U.S., but Trump followed up that victory by signing a bill that bans both ZTE and Huawei from selling from servicing U.S. government agencies while the Pentagon has prohibited sale of their of equipment on military bases. Australia has taken similar action too.

China's allegations against Micron could well turn out to be legitimate, but they may also signal another nasty turn in the trade war, which ultimately sees companies' from both sides of the dispute operations subjected to efforts at sabotaging their positions in each market. This would almost certainly be bad for the Australian Dollar.

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