Jump to content

Market alert: AUD/USD bounces as traders look past China GDP miss


ArvinIG

166 views

Australian dollar sees delayed upside reaction on Chinese data dump; China’s second-quarter GDP growth misses estimates at 0.4% y/y and AUD/USD moves higher, taking aim at Falling Wedge support.

1657853799539.jpg
Source: Bloomberg
 
 

AUD/USD is modestly higher after China reported a second-quarter gross domestic product (GDP) growth rate of 0.4% y/y, missing the 1.0% forecast. The growth slowdown is attributable to Covid restrictions that shuttered factories and kept people confined to their homes from March through May. A beaten-down property sector is another headwind to the Chinese economy, and homebuyers are reportedly refusing to pay mortgages across more than a dozen cities.

The slowdown in the world’s second-largest economy may lead to downgrades in global growth forecasts. The International Monetary Fund’s World Economic Outlook is due for an update on July 26. In its April update, China is forecasted to grow at 4.4% for 2022, which is well below the 5.5% target China is aiming for. Copper and iron ore prices are down more than 20% since May.

Beijing likely needs to open the tap on stimulus measures to support growth. Local governments are under pressure to increase special bond sales for infrastructure projects, a move that may underpin falling metal prices. Chinese policymakers appear focused on increasing the supply of credit rather than lowering rates. This morning, the one-year medium-term lending facility rate was kept unchanged at 2.85%.

There were signs of recovery in the June data. Industrial production rose to a 3.9% y/y pace in June, up from 0.7% in May. June retail sales climbed 3.1% y/y, up from -6.7% and beating the 0.3% consensus forecast. If China takes a more relaxed and targeted approach to contain Covid outbreaks and stimulus measures increase, then a third-quarter rebound is a likely scenario to forecast. That may explain the upside reaction in the Australian dollar.

AUD/USD technical outlook

AUD/USD is up around a quarter of a percent after a volatile overnight session. Prices are nearing wedge resistance, which overlaps a trendline from the December 2021 swing high. A break above resistance would see the 20-day Simple Moving Average shift into focus.

AUD/USD daily chart

1657854011492.png
Source: TradingView

Thomas Westwater | Analyst, DailyFX, New York City
15 July 2022

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

0 Comments


Recommended Comments

There are no comments to display.

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...