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China GDP Preview: Lower Growth Rate to Rattle AUD/USD Recovery

China GDP Preview: Lower Growth Rate to Rattle AUD/USD Recovery

2019-10-18 00:30:00
David Song, Strategist
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Trading the News: China Gross Domestic Product (GDP)

Updates to China’s Gross Domestic Product (GDP) report may rattle the recent advance in AUD/USD as Australia’s largest trading partner is anticipated to grow 6.1% versus 6.2% in the second quarter of 2019.

Image of DailyFX economic calendar

The trade war with the United States may produce another downtick in the GDP print as China faces higher tariffs, and the weakening outlook for the Asia/Pacific region may produce headwinds for the Australian Dollar as it puts pressure on the Reserve Bank of Australia (RBA) to further embark on its rate easing cycle.

In turn, a print of 6.1% or lower may undermine the recent advance in AUD/USD as the RBA retains its pledge to “to ease monetary policy further if needed.

However, efforts by Chinese officials may help to generate a better-than-expected GDP figure as “authorities have taken further steps to support the economy.”

As a result, a positive development coming out of Australia’s largest trading partner may fuel a larger correction in AUD/USD as it curbs speculation for another RBA rate cut.

Sign up and join DailyFX Currency Strategist David Song LIVE for an opportunity to discuss key themes and potential trade setups surrounding foreign exchange markets.

Impact that China GDP report had on AUD/USD during the previous release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

2Q

2019

07/15/2019 02:00:00 GMT

6.2%

6.2%

+11

+20

2Q 2019China Gross Domestic Product (GDP)

AUD/USD 30-Minute Chart

Image of AUD/USD 30 minute chart

Source: Trading View

China’s Gross Domestic Product (GDP) report showed the economy growing 6.2% per annum in the second quarter of 2019 after expanding 6.4% during the first three-months of the year. Nevertheless, on a quarter-over-quarter basis, the growth rate increased 1.6% versus 1.4% for the previous period despite the ongoing trade war with the United States.

The Australian dollar inched higher following China’s GDP report, with AUD/USD holding around the session-high (0.7040) to close the day at 0.7039. Learn more with the DailyFX Advanced Guide for Trading the News.

AUD/USD Rate Daily Chart

Image of AUD/USD daily chart

Source: Trading View

  • Keep in mind, the AUD/USD rebound following the currency market flash-crash has been capped by the 200-Day SMA (0.6969), with the exchange rate marking another failed attempt to break/close above the moving average in July.
  • Moreover, AUD/USD has taken out the September-low (0.6688) as it continues to track the downward trend carried over from late last year.
  • However, AUD/USD trades to a fresh monthly-high (0.6833) following the failed attempt to close below the 0.6690 (50% expansion) region, with the break/close above the 0.6800 (61.8% expansion) handle bringing the 0.6850 (78.6% expansion) area on the radar.

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--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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