AUDUSD Holds Steady Amid Negative Chinese Data But Technicals Hint at More Downside
AUDUSD is holding steady in today’s trading despite negative reports from Australia. As of this writing, the currency pair is down around 10 pips from its opening price as it trades around 0.6454. However, technicals suggest that the Aussie could slip soon.
It was reported earlier that China’s Fixed Asset Investment for April was down by 10.3% compared to where it was a year ago. This disappointed market expectations which were slightly modest at -9.8%. The country’s retail sales also fell short of meeting forecasts when it printed at -7.5% versus the -5.9% consensus. Additionally, the country’s unemployment rate for April ticked higher to 6.0% from the 5.9% reading for March. It was expected that it would go down by 0.1%.
The only positive report to come out of China today was the Industrial Production report for April which came in at 3.9%. Compared to a year ago, analysts had forecasted a growth rate of 1.5%.
AUDUSD often shares a positive correlation to Chinese data. This is because China is Australia’s largest trading partner and so, reports which point to a stronger Chinese economy imply that Australia would also benefit.
AUDUSD has retraced some of its losses from yesterday’s trading. By looking at the 4-hour time frame, it can be seen that the currency pair has pulled back to the 50% Fib level when you draw the Fibonacci retracement tool from the high of May 13 to the low of May 14. This price, around 0.6470, also coincides with a previous trend line which was broken yesterday (from connecting the lows of April 21, May 7, and May 12).
It is not uncommon for a market to retest a broken support level for resistance which could be what we’re seeing now. With that said, keep an eye out for a strong bearish candlestick because it may just confirm this bearish bias. AUDUSD could fall to yesterday’s low at 0.6402 or if there are enough sellers in the market, it could drop to as low as 0.6372 where it bottomed on May 4 and May 7.
On the other hand, a strong close above yesterday’s high at 0.6473 could mean that there are still buyers in the market. AUDUSD then traded higher to its May 11 highs at 0.6560.