AUD poised for upside on positive Chinese data

AUD/JPY will be the one to watch today, with macroeconomic data possibly nudging the currencies in opposite directions.

Australian currencies
Source: Bloomberg

This morning, Japan released its Q2 GDP flash estimates which showed  the economy had shrunk the most since 2011, at -6.8% year-on-year and -1.7% month-on-month.

The decline was largely expected due to April’s sales tax hike, but overall the figures were a touch better than market forecasts.

On the news, AUD/JPY edged up higher and the pair was further supported by some positive data from Westpac consumer sentiment and wage price index.

Consumer confidence improved for a third straight month with a reading at 98.5, while wage price growth was largely in line with analysts’ forecasts.

 

AUD/JPY Chart
Click to enlarge

 

Coming up at 1.30pm (Hong Kong and Singapore time), we’ll get a round of Chinese data where the market is expecting an improvement in industrial production, fixed asset investment and retail sales. Following last week’s figures, where we saw a record high trade balance and stellar export numbers, investors will be looking for reconfirmation of China’s growth momentum.

If the Chinese data does come in positive or above expectations, the AUD/JPY could see further upsides.

The pair is currently hovering above a key support zone around its 200-day simple moving average (SMA).

On a longer term basis, any rising geopolitical risks could see investors head back to safe haven assets like the yen, which could hold back the pair.

 

 

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