AUDUSD: Australian dollar Eyes 0.6400 as Chinese data show signs of recovery

AUDUSD
AUDUSD

The AUDUSD rose earlier today after China released the quarterly economic numbers. The numbers showed that the country’s economy slumped by 6.8% in the first quarter, which was worse than what economists were expecting. This was the first slowdown in more than 25 years. 

The positive side was that the economy has shown some signs of recovery in the past few weeks. This was evidenced by the data released today. For example, the unemployment rate improved from last month’s 6.2% to 5.2%. More so, industrial production dropped by just 1.1% after it dropped by more than 13% in February. 

Fixed asset investments dropped by 16.5% in March after dropping by more than 20% in the previous month. These numbers came a few weeks after we received positive manufacturing PMI data from China Logistics and Caixin. Also, they came a few days after we received relatively positive trade numbers for March. This is a sign that the country is recovering from the pandemic. 

China and Australia have a relatively close relationship. One in every five foreign students in Australia is from China while two thirds of Australian exports go to China. Therefore, Australia does well when China is doing well. Additionally, the Australian has started talking about reopening the economy. Some businesses and schools have already started operating

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AUDUSD Technical Outlook

Looking at the four-hour chart, we see that the medium-term trend for the AUDUSD pair is bullish. The pair is attempting to retest the 78.2 percent Fibonacci Retracement level and the psychologically-important level of 0.6400. 

This Fibonacci was drawn by connecting the highest and lowest swings in March.

More so, the pair is above the Ichimoku cloud, which is usually a sign of sustained upward trend. This is also confirmed by the bullish nature of the double exponential moving average average which has made a bullish crossover. Therefore, I expect the pair to continue rising and possibly retest yesterday’s high of 0.6400.

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