HomeContributorsFundamental AnalysisAUD/USD Extends Gains on Strong Chinese Data

AUD/USD Extends Gains on Strong Chinese Data

  • Chinese industrial production, retail sales accelerate
  • AUD/USD posts slight gains
  • US to release manufacturing, consumer confidence data on Friday

The Australian dollar has edged higher on Friday. In the European session, AUD/USD is trading at 0.6452, up 0.18%. Earlier, AUD/USD touched a high of 0.6473, its highest level since September 4th.

Chinese data beats expectations

China posted better-than-expected numbers on Thursday, raising hopes that the world’s number two economy might be finding its footing. Industrial production climbed 4.5% y/y in August, up from 3.7% in July and beating the consensus estimate of 3.9%. This was the strongest growth since April. There was more positive news as retail sales rose 4.6% y/y in August, up sharply from 2.5% in July and above the market consensus of 3.0%.

The solid data follows recent stimulus measures from the government after a host of economic data pointed to a sharp deterioration in economic growth. The central bank has cut benchmark rates such as the one-year loan prime rate and has reduced the reserve requirement ratio for all banks, which means that banks can keep less cash on hand.

These stimulus measures, while welcome, are unlikely to resolve the property sector crisis. Moody’s lowered its outlook for the property sector from stable to negative, in response to the brewing crisis which has engulfed two of the country’s largest private property developers. The Evergrande Group recently defaulted and Country Garden Holdings is trying to avoid a default.

Economic developments in China tend to have a significant impact on the Australian economy and the Australian dollar, as China is Australia’s largest trading partner. China’s slowdown has weighed heavily on the Aussie’s poor performance, as AUD/USD plunged 3.48% in August. If China’s downturn continues, we can expect the Australian dollar to lose ground.

In the US, there are two key events on the data calendar, which could trigger some volatility from the US dollar in the North American session. The Empire State Manufacturing Index, which plunged to -19 in August, is expected to improve to -10 points. UoM Consumer Sentiment is expected to dip to 69.1, down from 69.5 and inflation expectations are projected to remain unchanged at 3.5%.

AUD/USD Technical

  • AUD/USD continues to test resistance at 0.6453. The next resistance line is 0.6528
  • 0.6405 and 0.6330 are providing support

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