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AUD/USD Resumes Risk-On Rally After Chinese CPI

AUD/USD Resumes Risk-On Rally After Chinese CPI

Daniel Dubrovsky, Strategist

Talking Points

  • Australian Dollar shows a tepid response to Chinese CPI figures
  • CPI printed at 2.3% y/y in April, in line with economists’ estimates
  • DailyFX SSI remains net-long, implying bearish AUD/USD bias

Having trouble trading the Australian Dollar? This may be why.

The Australian Dollar showed a tepid reaction when China released April’s CPI report. Heading into the data announcement, the Aussie was recovering against its US counterpart in a risk-on environment, following Asian shares higher. Fifteen minutes after the data crossed the wires, the AUD/USD resumed climbing, reaching its highest level since Tuesday’s trading session began.

Chinese consumer prices increased 2.3 percent year-over-year (YoY) in April, matching economists’ expectations as well as the March result. This keeps the headline inflation rate unchanged for the third consecutive month. Meanwhile, wholesale inflation decreased 3.4 percent (YoY) versus -3.7 percent expected and -4.3 percent prior. This makes for the slowest pace of PPI deflation since December 2014.

Perhaps a lackluster response from the Aussie can be attributed to the data failing to surprise the markets. China is Australia’s largest trading partner. Economic news-flow from the former country often implies knock-on effects on the latter, triggering a response from the currency.

After pausing to digest the information, the Australian unit appeared to resume prior trading dynamics, pushing upward alongside the Nikkei 225 stock index and S&P 500 futures while the anti-risk Japanese Yen declined. However, the DailyFX Speculative Sentiment Index (SSI) is showing a reading of 1.66 following the announcement, implying that the broader AUD/USD bias continues to favor weakness.

Want to learn more about the DailyFX SSI indicator? Click here to watch a tutorial.

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