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AUD/USD eyes Chinese trade balance as Zero-Covid strategy continues


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China’s April trade balance may set the tone for sentiment in APAC trading; CPI inflation data out of China and the United States is in focus this week and AUD/USD may test the May low after bulls struggled to maintain gains.

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Source: Bloomberg
 
 

Monday’s Asia-Pacific forecast

A wave of risk aversion hit global financial markets last week, sending major equity indexes lower amid surging government bond yields. The US dollar gained against many of its peers after traders digested the Federal Reserve’s policy decision. However, the Australian dollar managed to stay afloat thanks to a hawkish surprise from the Reserve Bank of Australia. China’s trade balance is due out today, with analysts expecting to see the country’s surplus rise to $51.90 billion from 47.38 billion, according to a Bloomberg survey. The data will give insight into China’s supply chain woes as it battles to contain Covid outbreaks across key economic hubs.

Asia-Pacific traders will also be closely monitoring developments out of China this week, which could have an outsized impact on the Aussie Dollar, given the trade relationship between Australia and China. The People’s Bank of China may opt to cut lending rates within the economy over the coming weeks after a group of high-ranking Communist Party officials vowed to hold firm on the country’s “Zero-Covid” policy.

China’s consumer price index (CPI) for April is due out later this week. Analysts expect to see the month-over-month rate of inflation climb to 1.9% from 1.5% on a year-over-year basis, according to a Bloomberg survey. That would be the highest level since November 2021. A weaker-than-expected print would give the PBOC more leeway to enact accommodative policy to aid the economy. The figure will also help economists gauge global inflationary pressures. The United States is set to release its own CPI report this week.

Stocks in China and Hong Kong fell last week, and that trend may continue in the days ahead as markets calibrate to rising bond yields. Last week, NIO, the major Chinese electric vehicle maker, was added to a list for potential delisting from US exchanges by the SEC. The move renewed worry in China’s technology sector. Indonesia's first-quarter gross domestic product (GDP) growth is seen crossing the wires at 5.0% on a y/y basis. That would be down slightly from 5.02%.

AUD/USD technical forecast

AUD/USD managed to climb last week, but much of pair’s upside was trimmed going into the weekend. The May swing low at 0.7030 may give way if bears continue to pressure prices. The 2022 low at 0.6967, the 0.7000 psychological level, and a descending trendline may offer a degree of confluent support if the May low breaks.

AUD/USD daily chart

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Source: TradingView

Thomas Westwater | Analyst, DailyFX, New York City
09 May 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.

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