Australian Dollar Up On Chinese Data But Key Resistance Holds
- Chinese industrial production smashed forecasts in February
- Fixed-asset investment was stronger too, although retail sales slightly missed perky forecasts
- Australian Dollar bulls liked what they saw, but couldn’t push decisively higher
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The Australian Dollar got a lift Wednesday from some broadly upbeat Chinese economic data.
February’s industrial production rose by 7.2%, a full percentage point above expectations. Fixed-asset investment rose by 7.9%, when a 7% gain had been expected. Retail sales were the weak point, but even they were fairly perky. Sales rose by 9.7%, just below the hoped for 9.8% gain.
Beijing expects the Chinese economy to grow by about 6.5% this year, according to the target released this month at the National People’s Congress. China-watchers think that this commitment to a relatively sedate target mans that China is concentrating on more sustainable growth which does not come at the cost of a huge increase in debt.
In any case these data suggest that the world’s second largest economy is heading into 2018 in very reasonable shape, although the long Lunar New Year break may distort t all the figures at least until we get a look at those for March.
The Australian Dollar often finds itself in the position of liquid China proxy give its home country’s huge trading links with China. It certainly seemed to do so Wednesday, with AUD/USD up noticeably right after the data.
However, its gains were capped by resistance in the 0.7870 area which was also the daily high on February 21, just before the pair took a lurch lower.
On its daily chart, Australian Dollar broke above the long downtrend from January’s three-year peaks against its US rival last week, but its vigor appears to have faded somewhat despite some quite strong domestic economic numbers.
Interest-rate differential still favor the greenback, however. The Federal Reserve is expected to tighten monetary policy again next week, and to do so at least twice more this year. The Reserve Bank of Australia meanwhile is expected to keep its own, record-low Official Cash Rate at 1.50% until well into 2019.
Technically speaking its’s too early to be certain that AUD/USD’s latest foray higher has failed. If it has then support at 0.7787 will come into focus- the pair settled there last week. Below that the March lows of 0.7710 will be in play.
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--- Written by David Cottle, DailyFX Research
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.