AUD USD Weighed Down by China Australia Data USD Strength

November 10, 2015 – AUD/USD continued to be weighed down on Tuesday well after somewhat disappointing data releases from both China and Australia, as well as persistent US dollar strength. The currency pair traded in a tight range on Tuesday just above major 0.7000 psychological support.

National Australia Bank released its monthly business survey results for October showing a relatively low reading of 2. Although this number still indicates improving conditions, it is a significant drop from September’s reading of 5 and much lower than the long-term average.

Perhaps of greater importance than this data, however, was China’s release of its Consumer Price Index (CPI), which is the most important indicator of inflation in China. The CPI came out at 1.3% against prior expectations of 1.5%. This data renewed fears of potential deflation in China, which weighed on both the Chinese yuan and Australian dollar.

Adding to the rather grim prospects for AUD/USD have been heavily-pressured gold prices along with a persistently strong US dollar that has been benefiting from recently renewed expectations of a December Fed rate hike.

Combined with AUD/USD’s fundamental picture, the technicals also point to a bearish outlook. The long-term and short-term trends are both rather clearly to the downside, as the currency pair has been falling consistently for well more than a year. Just last week, AUD/USD tested the 0.7200 resistance level to the upside before retreating back down to its current position near the noted 0.7000 psychological support level. This level is not far above September’s six-year low around 0.6900.

This week, another key set of economic data in the form of Australia’s Employment Change and Unemployment Rate will be released on Thursday. This release could affect the prospects for another potential interest rate cut by the Reserve Bank of Australia.

With any breakdown below the noted 0.7000 support level, the next major downside target, which would confirm a continuation of the long-term downtrend, is at the 0.6800 support objective.