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Australian Dollar Outlook Brightens on China Stabilization Clues

By , Currency Strategist
09 August 2013 08:23 GMT

The outlook for the Australian Dollar appears to be brightening amid emerging signs of stabilization in Chinese economic news flow.

Talking Points

  • Australian Dollar Outperforms on Another Rosy Chinese Data Set
  • FX Markets Likely to See Choppy Trade Through Trading Week-End

The Australian Dollar outperformed in otherwise quiet overnight trade, rising as much as 0.5 percent on average against its major counterparts. The push higher followed a supportive set of Chinese economic data. July’s inflation figures revealed softer CPI and PPI readings than economists expected, offering a perception of greater room for Beijing to introduce monetary stimulus to counteract what has become an increasingly worrisome slowdown. Meanwhile, Industrial Production posted a 9.7 year-on-year increase, topping forecasts calling for a 8.9 percent increase and producing the strongest reading in five months.

Today’s news-flow follows yesterday’s encouraging trade figures and bolsters our argument in favor of a larger Aussie recovery ahead as Chinese economic data stabilizes relative to expectations, helping to halt the slide in investors’ economic growth outlook for the world’s second-largest economy. That in turn has scope to trim calls for further RBA interest rate cuts, which may spark a round of profit-taking on record-high speculative bets against the Australian unit and push it higher. Prices are now testing chart resistance above 0.91 against the US Dollar, with a push higher clearing the way for a move above the 0.93 figure.

The economic calendar is quiet through the end of the trading week. UK Trade Balance and Construction Output reports headline the docket in European hours while Wholesale Inventories amount to the only bit of event risk on tap in the US. None of these releases are likely to materially impact major themes at play in the financial.

In the UK, this week’s release of the BOE quarterly Inflation Report seems to have firmly anchored traders’ monetary policy outlook for now. Meanwhile, the US inventories print seems too small a data point to materially shift the course of speculation about the Fed’s intent to begin “tapering” QE asset purchases in September. With that in mind, price action may prove choppy in the hours before the closing bell on Wall Street, with investors waiting until next week to consider meaningful directional bets.

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Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

Credit Card Spending – Retail (MoM) (JUL)

0.4%

0.5%

1.0%

22:45

NZD

Credit Card Spending – Total (MoM) (JUL)

0.2%

-

1.2%

23:50

JPY

Money Stock M2 (YoY) (JUL)

3.7%

3.8%

3.8%

23:50

JPY

Money Stock M3 (YoY) (JUL)

3.0%

3.1%

3.1%

23:50

JPY

Tertiary Industry Index (MoM) (JUN)

-0.3%

-0.4%

1.3%

1:30

CNY

Consumer Price Index (YoY) (JUL)

2.7%

2.8%

2.7%

1:30

CNY

Producer Price Index (YoY) (JUL)

-2.3%

-2.1%

-2.7%

1:30

AUD

RBA Statement on Monetary Policy

-

-

-

5:00

JPY

Consumer Confidence Index (JUL)

43.6

45.0

44.3

5:00

JPY

BOJ Monthly Economic Report (AUG)

-

-

-

5:30

CNY

Industrial Production YTD (YoY) (JUL)

9.4%

9.2%

9.3%

5:30

CNY

Industrial Production (YoY) (JUL)

9.7%

8.9%

8.9%

5:30

CNY

Fixed Assets Ex Rural YTD (YoY) (JUL)

20.1%

20.0%

20.1%

5:30

CNY

Retail Sales YTD (YoY) (JUL)

12.8%

12.8%

12.7%

5:30

CNY

Retail Sales (YoY) (JUL)

13.2%

13.5%

13.3%

Euro Session:

GMT

CCY

EVENT

EXP

PREV

IMPACT

8:30

GBP

Visible Trade Balance (£) (JUN)

-8350M

-8491M

Low

8:30

GBP

Trade Balance Non EU (£) (JUN)

-3800M

-4093M

Low

8:30

GBP

Total Trade Balance (£) (JUN)

-2200M

-2435M

Medium

8:30

GBP

Construction Output s.a. (MoM) (JUN)

-1.9%

0.0%

Low

8:30

GBP

Construction Output s.a. (YoY) (JUN)

0.2%

-4.8%

Low

10:00

EUR

ECB Announces 3yr LTRO Repayment

-

€2.1B

Low

Critical Levels:

CCY

SUPP 3

SUPP 2

SUPP 1

Pivot Point

RES 1

RES 2

RES 3

EURUSD

1.3226

1.3298

1.3339

1.3370

1.3411

1.3442

1.3514

GBPUSD

1.5355

1.5444

1.5491

1.5533

1.558

1.5622

1.5711

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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09 August 2013 08:23 GMT