AUD/USD faces key test as focus returns to China
Fawad Razaqzada July 12, 2019 7:03 AM
Despite a Japanese bank holiday on Monday, it could be a busy Asian session for Chinese and related markets as investors respond to the latest GDP, industrial production and retail sales data from the world’s second largest economy.
Despite a Japanese bank holiday on Monday, it could be a busy Asian session for Chinese and related markets as investors respond to the latest GDP, industrial production and retail sales data from the world’s second largest economy. If China’s upcoming data deteriorates further then we could see the likes of the Aussie and kiwi comes under renewed pressure because of the fact China is Australia and NZ’s largest trading partner. But if the numbers are surprisingly strong then the AUD/USD and NZD/USD could catch up with the CAD/USD and break higher. In addition to Chinese data, we will also have the Aussie jobs numbers to look forward to on Thursday of next week. So, the Australian dollar could be in for some much-needed volatility in any case.
On Friday we learnt that China’s trade balance improved noticeably in June, but this was only because imports fell sharply (by 7.3% y/y in dollar terms) relative to exports which declined more modestly (1.3% y/y). The slowdown was undoubtedly exacerbated by China’s ongoing trade dispute with the US. Indeed, in the first half the year, China’s exports to the US fell by more than 8%, while imports dropped by almost 30%. So, things aren’t looking too good ahead of the GDP and industrial production numbers on Monday. We will discuss these in greater detail in our upcoming Week Ahead report later.
From a technical point of view, the AUD/USD has struggled to show the sort of bullish price action one would have expected after it created what looked like a false break reversal around the 0.6865 level in mid-June. Although it went on to make a new higher high above the prior resistance in the 0.7020 region, it couldn’t make further bullish progress and it fell back within the existing range. So, it needs to break and hold above the 0.7020 pivotal level for the technical bias to turn bullish again. Otherwise, the Aussie could drift further lower and head towards the 2019’s lows again.
Source: Trading View and FOREX.com
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.