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Australian dollar under pressure on China activity data miss. Where to for AUD/USD?

The Australian dollar could be vulnerable after China’s industrial production and retail sales data disappointed. Will AUD/USD recover recent loses?

The Australian dollar sunk further after a series of Chinese economic activity data crossed the wires earlier today, missing expectations.

Industrial production came in at -2.9% year-over-year to the end of April against 0.5% forecast and March’s print of 5.0%. Retail Sales came in at -11.1%, instead of -6.6% expected and -3.5% previously.

Today’s activity data comes on the back of slowing loan growth data released on Friday. That led to some market participants looking for a modest reduction in the one-year medium term lending facility rate today.

The Peoples Bank of China (PBOC) left them disappointed, leaving the rate at 2.85%. Over the weekend the PBOC had eased interest rates for first home buyers by 20 basis points to 4.4%.

With strict Covid-19 lockdowns remaining in place for the world’s second largest economy, the growth outlook for China remains a concern for global trade.

The Australian dollar is vulnerable to these sways in perception of China’s prospects. Shifting risk sentiment had seen a volatile few days for the Aussie and today’s figures appear likely to add to the uncertain outlook.

Prior to the data, markets had been in a risk on mode with equities having started the week on firmer footing.

USD/CNY continues to move higher and is near the top end of the trading band as it flirts with 6.8000. A weakening yuan will have ramifications for currencies throughout the region, further undermining AUD/USD.

AUD/USD one minute chart

AUD/USD technical analysis

AUD/USD continued to recover on Monday after las week’s sell-off. A series of Death Crosses emerged over several weeks and reveal bearish momentum had been unfolding for a while.

Nearby resistance might be at January’s low of 0.6976 and then further up at the November 2020 low of 0.6992. A further resistance zone could be at 0.7030 - 0.7050, just above the 10-day simple moving average (SMA).

On the downside, support could be at last week’s low of 0.6829.


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The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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