After AUDUSD rallied on the wake of the UK general election polls, it was all downhill for the currency pair on Friday. It reached a 19-week high at 0.6936 and dropped to 0.6862 by the ew York session. By the end of last week’s trading, AUDUSD had incurred a 34-pip loss for the day at 0.6871.
US-China Trade Deal
The Aussie fell victim to the dollar’s strength following news reports that the US and China have agreed to a phase one deal. According to US policymakers, China has agreed to buy at least 200 billion USD-worth of agricultural, energy, and manufactured products from the US until 2021. In exchange, the US will roll back some of its existing tariffs on Chinese goods. The additional levies, which were previously set to take effect last December 15, have been cancelled.
It’s worth noting that China has yet to confirm details of any agreement with the US.
Chinese Data Tops Forecasts
Earlier in today’s Asian session, the Aussie saw a brief spike up as data from China beat forecasts. The country’s annual industrial production grew by in November 6.2% which was higher than both the 5.1% forecast and it’s reading for October at 4.7%. Consumer spending in China has also reflected resilience in its economy. On a yearly basis, retail sales in November posted an 8.0% uptick. The forecast was only for a 7.6% growth to follow October’s reading at 7.2%.
Meanwhile, fixed asset investment and the unemployment rate both came in as expected at 5.2% and 5.1%, respectively.
On the hourly chart of AUDUSD, we can see that the currency pair has pared some of its gains from last week. When you draw the Fibonacci retracement tool from the low of December 10 to last week’s high, AUDUSD can be seen testing support at the 50% Fib level. If there are not enough buyers in today’s trading, support may fall through. We can then eye the area around 0.6850 for support because this price aligns nicely with the 61.8% Fib level and the pair’s previous highs from the first week of December. If it does not hold, we could see the rising trend line be tested around 0.6830.
On the other hand, if support at the 50% Fib level holds, AUDUSD could trade higher to test last week’s highs. The area around 0.6936 is the near-term resistance level. Looking at the higher time frames, you will easily see that this price served as the currency pair’s highs for November.