THE TAKEAWAY: Chinese trade figures show pickup in economic activity > Australian economy may benefit from greater export demand, providing support to yields > AUD/USD bought
The Australian dollar traded higher versus its major counterparts as Chinese exports increased at the fastest rate since May 2012. At 2:00 GMT today the Chinese trade balance figures were released posting strong growth in exports, increasing at +14.1 percent in December and beating expectations set for +5.0 percent growth. In November exports grew by +2.9 percent. Moreover, December imports increased by +6.0 percent, beating expectations set at +3.5%. November imports recorded no net change. On net the Chinese trade balance increased to 31.60 billion US dollars in December, up from 19.63 billion US dollars in November.
Robust trade figures from the world’s second largest economy may provide a sigh of relief from previously declining data which had many Forex traders worried that China may experience a “hard” economic landing. The Australian economy exports a significant amount of resources to China, and an increase in trade flow bodes well for Aussie growth prospects. Forex traders bid the high yielding currency amid speculation that RBA officials may be less inclined to introduce another round of rate cuts on February 5, potentially preserving the high-yielding carry profile the Aussie crosses have to offer.
On a technical bearing, the AUD/USD appears to be near a significant resistance level on a weekly time frame which could result in an indecisive trading environment as both the technical and fundamental readings appear to be at odds.
AUD/USD, 1 Minute Chart
AUD/USD, Weekly Chart