AUD/USD Weighed Down by China/Australia Data, USD Strength

<p>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 […]</p>

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.

AUD/USD Daily Chart

 

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.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.