Australian Dollar Outlook Brightens on China Stabilization Clues
The outlook for the Australian Dollar appears to be brightening amid emerging signs of stabilization in Chinese economic news flow.
Talking Points
Australian Dollar Outperforms on Another Rosy Chinese Data Set
FX Markets Likely to See Choppy Trade Through Trading Week-End
The Australian Dollar outperformed in otherwise quiet overnight trade, rising as much as 0.5 percent on average against its major counterparts. The push higher followed a supportive set of Chinese economic data. July’s inflation figures revealed softer CPI and PPI readings than economists expected, offering a perception of greater room for Beijing to introduce monetary stimulus to counteract what has become an increasingly worrisome slowdown. Meanwhile, Industrial Production posted a 9.7 year-on-year increase, topping forecasts calling for a 8.9 percent increase and producing the strongest reading in five months.
Today’s news-flow follows yesterday’s encouraging trade figures and bolsters our argument in favor of a larger Aussie recovery ahead as Chinese economic data stabilizes relative to expectations, helping to halt the slide in investors’ economic growth outlook for the world’s second-largest economy. That in turn has scope to trim calls for further RBA interest rate cuts, which may spark a round of profit-taking on record-high speculative bets against the Australian unit and push it higher. Prices are now testing chart resistance above 0.91 against the US Dollar, with a push higher clearing the way for a move above the 0.93 figure.
The economic calendar is quiet through the end of the trading week. UK Trade Balance and Construction Output reports headline the docket in European hours while Wholesale Inventories amount to the only bit of event risk on tap in the US. None of these releases are likely to materially impact major themes at play in the financial.
In the UK, this week’s release of the BOE quarterly Inflation Report seems to have firmly anchored traders’ monetary policy outlook for now. Meanwhile, the US inventories print seems too small a data point to materially shift the course of speculation about the Fed’s intent to begin “tapering” QE asset purchases in September. With that in mind, price action may prove choppy in the hours before the closing bell on Wall Street, with investors waiting until next week to consider meaningful directional bets.
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Asia Session:
GMT | CCY | EVENT | ACT | EXP | PREV |
22:45 | NZD | Credit Card Spending – Retail (MoM) (JUL) | 0.4% | 0.5% | 1.0% |
22:45 | NZD | Credit Card Spending – Total (MoM) (JUL) | 0.2% | - | 1.2% |
23:50 | JPY | Money Stock M2 (YoY) (JUL) | 3.7% | 3.8% | 3.8% |
23:50 | JPY | Money Stock M3 (YoY) (JUL) | 3.0% | 3.1% | 3.1% |
23:50 | JPY | Tertiary Industry Index (MoM) (JUN) | -0.3% | -0.4% | 1.3% |
1:30 | CNY | Consumer Price Index (YoY) (JUL) | 2.7% | 2.8% | 2.7% |
1:30 | CNY | Producer Price Index (YoY) (JUL) | -2.3% | -2.1% | -2.7% |
1:30 | AUD | - | - | - | |
5:00 | JPY | 43.6 | 45.0 | 44.3 | |
5:00 | JPY | BOJ Monthly Economic Report (AUG) | - | - | - |
5:30 | CNY | Industrial Production YTD (YoY) (JUL) | 9.4% | 9.2% | 9.3% |
5:30 | CNY | Industrial Production (YoY) (JUL) | 9.7% | 8.9% | 8.9% |
5:30 | CNY | Fixed Assets Ex Rural YTD (YoY) (JUL) | 20.1% | 20.0% | 20.1% |
5:30 | CNY | Retail Sales YTD (YoY) (JUL) | 12.8% | 12.8% | 12.7% |
5:30 | CNY | Retail Sales (YoY) (JUL) | 13.2% | 13.5% | 13.3% |
Euro Session:
GMT | CCY | EVENT | EXP | PREV | IMPACT |
8:30 | GBP | Visible Trade Balance (£) (JUN) | -8350M | -8491M | Low |
8:30 | GBP | Trade Balance Non EU (£) (JUN) | -3800M | -4093M | Low |
8:30 | GBP | Total Trade Balance (£) (JUN) | -2200M | -2435M | Medium |
8:30 | GBP | Construction Output s.a. (MoM) (JUN) | -1.9% | 0.0% | Low |
8:30 | GBP | Construction Output s.a. (YoY) (JUN) | 0.2% | -4.8% | Low |
10:00 | EUR | ECB Announces 3yr LTRO Repayment | - | €2.1B | Low |
Critical Levels:
CCY | SUPP 3 | SUPP 2 | SUPP 1 | Pivot Point | RES 1 | RES 2 | RES 3 |
1.3226 | 1.3298 | 1.3339 | 1.3370 | 1.3411 | 1.3442 | 1.3514 | |
1.5355 | 1.5444 | 1.5491 | 1.5533 | 1.558 | 1.5622 | 1.5711 |
--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com
To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak
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