AUDUSD Heading to 0.65 as China Inflation Shows Weak Demand
AUDUSD has been supported by a hawkish RBA but it doesn't have much else to keep it up, with Australian and Chinese economies in difficulty.
AUDUSD has been supported by a hawkish RBA, but it doesn’t have much else to keep it up, with the Australian and Chinese economies in difficulty. The price action on Friday also supported further downside momentum in AUD/USD after the surge and the rejection which sent this pair 1 cent lower.
Commodity currencies saw a brief surge on Thursday, buoyed by hopes of Chinese stimulus following the post-Trump-election drop the day before. However, by Friday, these currencies lost ground again. The initial bounce, partly driven by unwinding gains in the USD post-Trump win and expectations of substantial Chinese stimulus, lifted AUD/USD by a cent to the 0.6880s. But with no major surprises in China’s stimulus, market enthusiasm faded, leading AUD/USD to shed about a cent on Friday, as the USD strengthened against major currencies.
AUD/USD Chart Daily – MAs Continue to Push the Highs Lower
The 100 and 200-day moving averages formed resistance just below 0.67, pushing AUD/USD below 0.66 by the week’s close. This retracement reinforced the downtrend, with the overbought stochastic indicator pointing lower. Sellers are now eyeing a break below 0.65, which could open the way to the 0.6350 level. In terms of economic indicators, monthly metrics had been expected to decrease by -0.1% (previously 0.0%), but a sharper-than-expected -0.3% decline was recorded. Meanwhile, the Producer Price Index (PPI) year-over-year came in at -2.5%, slightly up from the prior -2.8%.
Chinee CPI and PPI Inflation for October
The Chinese Consumer Price Index (CPI) year-over-year was anticipated to hold steady at 0.4% but fell short. Released over the weekend after market hours, these figures, along with a recent Caixin PMI report, signaled sluggish price activity, with only a slight increase in input costs for the services sector. After lackluster September data and weak October inflation numbers, these reports continue to highlight soft demand and tempered market optimism in China which is negative for risk currencies such as the Aussie.
AUD/USD Live Chart
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