AUD/USD is trading lower as investors digest the lower-than-expected Chinese industrial and retail data. Earlier on Monday, the Middle Kingdom’s National Bureau of Statistics indicated that the country’s industrial production rose by 9.8% in April YoY. The figure matches economists’ estimates. However, it was lower than the prior month’s 14.1%. At the same time, Chinese retail sales rose by 17.7% on a year-on-year basis. This is lower than the predicted 24.9% and March’s 34.2%.
The impact of Chinese data on AUD/USD highlights the interconnection between economies. China is Australia’s top two-way trading partner. Notably, 29% of Australia’s global trades are with China. Besides, for China, Australia is the leading source of key raw materials such as coal and iron ore. While the ongoing geopolitical tensions between the two countries have impacted trade, their reliance on each other seems to surpass their differences.
In the ensuing sessions, AUD/USD will also be reacting to the RBA meeting minutes scheduled for Tuesday and FOMC meeting minutes on Thursday. During its meeting on 4th May, the Reserve Bank of Australia left interest rates unchanged at the record low of 0.1%. This also included the extension of its Yield Curve Control (YCC) and $78 billion quantitative easing (QE) programs.
RBA has maintained that it will commit to its accommodative monetary policy until inflation rises to the targeted range of between 2-3%. At the moment, Australia’s inflation rate is at 1.1%. In the year’s first quarter, it rose by 0.6% compared to the expected 1.4%.
As indicated by the central bank, unemployment change and wage growth are key drivers of inflation. On Thursday, the country’s Bureau of Statistics is set to release job data. Analysts expect the unemployment rate to remain at the prior month’s level at 5.6%. At the same time, the expected employment change reading of 15k is significantly lower than the previous 70.7k.
The US Federal Reserve has also maintained a dovish tone despite the strong inflation data and resultant concerns over the economy overheating. According to the bank’s officials, the expected inflation is transitory.
AUD/USD Technical Outlook
The currency pair is down by 0.13% at 0.7766. It is finding support at 0.7750, which remains a key support/resistance level. On a 4-hour chart, it is trading along the 50-day EMA and slightly above the 25-day EMA. I expect the pair to rebound to 0.7816 before pulling back to 0.7800. on the other hand, the pair may drop further to find support at 0.7700.