The Australian dollar was bid on Wednesday, helped by the recent batch of Chinese data. At the time of writing, the AUD/USD pair traded half a percent higher on the day, moving above 0.7130.
Chinese data boost the Aussie today
Earlier in the day, Chinese industrial production rose 3.8% year-on-year for November, up from 3.5% scored previously . On the other hand, retail sales in the country slid to 3.9% from 4.9% in October , while fixed-asset investment declined notably to 5.2%, down from 6.1% in the previous reading . It looks like investors had been expecting worse numbers as the Australian dollar was bought afterward.
Following the release of the November activity numbers, China’s National Bureau of Statistics (NBS) released a statement, expressing their take on the economy:
- Economic recovery is facing many constraints.
- November indicators are in a reasonable range.
- China’s economy continued to improve.
- Semiconductor shortage for the auto sector has eased a little.
- Overall real estate market is stable.
- Some cities face more pressure due to people outflows, economic difficulties.
US data & Fed under scrutiny
Later in the session, the US retail sales for November are due, expected to decline notably from October’s levels . Additionally, December’s New York Empire State Manufacturing Index is anticipated to decrease to 25 from 30.9 in November.
Additionally, the Fed’s monetary policy meeting outcome is due and the central bank is widely expected to double the tapering pace , amid the ongoing surge in inflation. Furthermore, the Fed will likely telegraph the need for tighter monetary policy, leading to two or three rate hikes in the following year.
Volatility will likely be elevated after the decision, so careful trading is advised.
Technically speaking, the Australian dollar has managed to bounce off August lows near 0.71. As long as it trades above that level, the short-term trend seems bullish.
The MACD indicator sent a bullish signal on the daily chart, reinforcing the bullish narrative.
The next target for bulls will be at 0.7170, where October lows are converged with December highs. If the Aussie rises above that level, the medium-term trend could change to bullish, targeting 0.7320.
Alternatively, a failure to stay above 0.710 could lead to a retest of the current cycle lows near the psychological level of 0.70. Everything could be decided after tonight’s FOMC decision.