Wall Street, Treasury Yields, AUD/USD, China, Economic Data - Talking Points
- Asia-Pacific markets aiming higher after a volatile week
- Sentiment may shift on upcoming Chinese economic data
- AUD/USD looks up after bouncing from support last week
Monday’s Asia-Pacific Outlook
Asia-Pacific markets will start the week with a slate of economic data releases out of China, including statistics on house prices, fixed asset investment, industrial production, retail sales, and unemployment. These reports have market-moving potential and will provide traders the latest snapshot of the world’s second-largest economy.
Sentiment also appears to be improving following last week’s inflation-inspired market selloff when US consumer price inflation (CPI) data caused markets to fear a sooner-than-expected hawkish policy turn from the Federal Reserve. That nudged rates traders to sell Treasuries, causing yields to increase. The benchmark 10-year yield rose to its highest level since early April before turning lower into the weekend. A lackluster US retail sales figure also calmed worries about imminent tapering of stimulus.
Government bond yields will remain a focus for traders this week, with the Treasury market in focus as a proxy gauge for broader sentiment. Outsized up- or down-side deviations from baseline forecasts for Monday’s Chinese economic data may very well define the risk on/off backdrop. The Australian Dollar is a prime candidate to react to this data flow given its home country’s trading relationship with the Asia-Pacific economic powerhouse.
Indeed, China is Australia’s primary trading partner, and looks its behemoth mining sector for key commodities including iron ore and coal. The relationship has been complicated by spat between Beijing and Canberra recently, pushing the Chinese government to bolster and diversify its supply chain. However, that process may take years – if not decades – to complete. With that in mind, the Australian Dollar ought to remain sensitive to data shaping the Chinese economic outlook.
Source: DailyFX Economic Calendar
AUD/USD Technical Breakdown
AUD/USD is off to a rather quiet start this week, hovering around 0.7780. Last week, the currency pair found support near the 50- and 100-day Simple Moving Averages (SMA), but now faces a level of prior resistance at the 0.78 level. A break above that would put the recent swing high at 0.7848 into focus. To the downside, AUD/USD will look at prior levels of resistance to turn into possible support at 0.7750. Below that brings the 50- and 100-day SMAs come back into view.
AUD/USD Daily Chart
Chart created with TradingView
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--- Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwater on Twitter
