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Australian Dollar Outlook: S&P 500, US Retail Sales Eyed After Chinese Data

Australian Dollar Outlook: S&P 500, US Retail Sales Eyed After Chinese Data

Daniel Dubrovsky, Contributor
What's on this page

Australian Dollar, AUD/USD, Chinese Industrial Production, S&P 500, US-China Trade Talks - Talking Points

  • Australian Dollar falls as Chinese data dump misses expectations
  • Aussie eyes S&P 500 reaction to US retail sales before trade talks
  • AUD/USD may be at risk to turning lower on bearish chart pattern

The Australian Dollar weakened as a slew of key Chinese economic news crossed the wires. Industrial production rose 4.8% y/y versus 5.2% expected in July. Retail sales meanwhile slumped -1.1% y/y versus an expected gain of 0.1% for the same period. The latter has yet to enter positive territory since the outbreak of the coronavirus crushed local growth.

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China is Australia’s largest trading partner and economic developments in the former can often imply knock-on impacts on the latter. The rather swift recovery from the world’s second-largest economy could be helping to keep the ASX 200 from topping despite recent spikes in local cases of the coronavirus. The lockdown in Melbourne to help contain the spread may be preventing the ASX from setting higher highs.

Heading into the data, AUD/USD was trading cautiously lower as Philip Lowe, Governor of the Reserve Bank of Australia (RBA), spoke before the Parliament Economic Committee. He noted that there is a ‘high degree’ of uncertainty around the outlook, adding that the cash rate is ‘likely’ to remain at 0.25% ‘for some years’. This may have contributed to some of the weakness in the Aussie before China updated its figures.

From here, AUD/USD is eyeing US retail sales and University of Michigan Sentiment later today. US economic data continues to outperform relative to expectations, opening the door to further upside surprises. That may boost the S&P 500 and sentiment-linked Australian Dollar. However, keep in mind that US-China trade talks are next week. That could sour the markets’ mood, sending AUD/USD lower.

Chinese Industrial Production and Retail Sales History Over the Past Year

Chinese Industrial Production and Retail Sales History Over the Past Year

Australian Dollar Technical Analysis

The Australian Dollar could be at risk to turning lower against the US Dollar from a technical standpoint. AUD/USD has broken under a bearish Rising Wedge reversal chart pattern. Prices are hovering around the 23.6% Fibonacci extension at 0.7147. Downside confirmation has been lacking however. A push under the 0.7015 – 0.7064 inflection range could open the door to a deeper reversal.

AUD/USD Bullish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -4% 2% 0%
Weekly -24% 44% 9%
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AUD/USD Daily Chart

AUD/USD Daily Chart

Chart Created in TradingView

--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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

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