Monday’s Asia-Pacific outlook

Chinese industrial profits data is set to cross the wires this morning, which could help to set the tone for Asia-Pacific trading. The Australian dollar is a prime proxy to gauge the market’s response to those numbers. AUD/USD saw a moderate bounce last week after a multi-week losing streak alongside a broader pullback in risk assets.

Industrial profits grew by 3.5% on a year-over-year basis in April, which was seen as a dull figure weighed down by a wave of Covid-19 infections that caused lockdowns across major Chinese economic hubs. The situation has improved since then, although cities like Beijing and Shanghai continue to see localized Covid measures. Still, this morning's data should reflect a growing recovery, which could help to revive some optimism across the APAC region. AUD/USD may rise if the y/y figure exceeds that of the prior month.

In Japan, the final revisions of April’s Coincident and Leading economic index figures will drop. The Japanese yen fell against the US dollar last week but sellers appear to backed off, with USD/JPY gaining only 0.16%. Still, the currency pair hit its highest level since September 1998 before trimming strength. The technical posture has weakened recently, but USD bulls may yet attempt an attack.

Industrial metals like copper and aluminum could give clues to how traders are assessing the short-term macroeconomic outlook. Copper prices fell to the lowest since February 2021 last week. Steel demand has eased in recent months. Renewed fears about an economic recession following the Fed’s latest interest rate hike have weighed heavily on demand for industrial metals. A firm print on China’s industrial profits data may help to inspire some confidence across the metals space.

Notable Events for June 27:

• Indonesia – M2 Money Supply (May)
• Philippines – Business Confidence (Q2)
• Taiwan – Consumer Confidence (June)
• Hong Kong – Balance of Trade (May)

AUD/USD technical forecast

A trendline from 2021 helped to underpin prices during last week’s action. A move higher faces potential resistance from the 23.6% Fibonacci retracement level and the falling 20-day Simple Moving Average (SMA). The MACD and RSI oscillators are both improving, and crosses above their respective midpoints may provide technical boosts for the Australian dollar in the days ahead.

AUD/USD daily chart

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