Australian Dollar, Chinese Economy, AUD/USD, PBOC, RBA, CGB – Talking Points
- the Australian dollars It gave up some overnight gains after the weak Chinese data
- Industrial production and retail sales declined, as did investment activity
- RBA meeting minutes showed up, or no change considered. minimum Australian dollar / US dollar?
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The Australian dollar fell amid doubts about China’s economic recovery after statistics revealed a slowdown in activity.
Chinese data today showed that industrial production came in at 5.6% year-on-year through the end of April versus 10.9% expected and March at 3.9%.
Retail sales for the same period came in at 18.4%, instead of the expected 21.9% and 10.6% previously. Non-rural fixed asset investment and real estate investment also beat estimates, which came in at 4.7% and -6.2%, respectively.
Today’s figures come on the back of last week’s weak inflation data and the People’s Bank of China (PBOC) left the one-year medium-term lending facility (MLF) rate unchanged yesterday at 2.75%. Although they added 25 billion yuan of liquidity.
10-year Chinese government bond (CGB) yields continue to trade near 2.7%, the level they were in November last year before Covid-19 restrictions were lifted.
AUD.USD recovered 68 cents overnight on the back of US dollar weakness but gave up some ground as fears grew over the number one export destination in Australia.
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How to trade AUD/USD
Ahead of the Chinese data, the RBA meeting minutes showed that the decision to raise interest rates at the May meeting was quite balanced and stated that “members discussed two options: keeping the cash rate unchanged or increasing the cash rate by 25 basis points.”
The case for keeping rates unchanged rested mostly on the recent slowdown in inflation. The CPI was 7.0% year-on-year through the end of March, down from 7.8% at the end of December.
In the hiking argument, it has been noted that although price pressures appear to be decreasing, any acceleration in inflation will lengthen the period during which the CPI remains above the target range of 2-3%. The bank’s current forecasts aim for the middle of 2025.
Australian jobs data will be released on Thursday and a Bloomberg survey of economists expects the unemployment rate to remain unchanged at a 50-year low of 3.5%.
Technical analysis of the Australian dollar / US dollar
AUD/USD has been in the range of 0.6565 to 0.6818 for 12 weeks after a false breakout occurred to the upper side last week.
A false breakout is characterized by the price moving out of the last range before closing the session back inside it.
0.6785-0.6820 area might provide resistance with several previous highs in that area. On the downside, support might lie at previous lows 0.6636, 0.6574, 0.6565, and 0.6548.
The 10, 21, 34, 55, 100, 200 and 260 day simple moving averages (SMA) are all within 0.6685 and 0.6788. This gathering of SMAs could indicate that the range trading environment may continue for the time being.
An eventual break above or below these SMAs could show momentum in that direction in a potential volatility breakout.
– By Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @employee on Twitter