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AUD/USD Forecast: Aussie Higher on Renminbi Fix & Chinese Stimulus

AUD/USD Forecast: Aussie Higher on Renminbi Fix & Chinese Stimulus

Warren Venketas, Analyst

AUD/USD ANALYSIS &TALKING POINTS

  • China comes to the party giving risk assets a boost.
  • Upside move likely to fade as Jackson Hole threatens.

AUSTRALIAN DOLLAR FUNDAMENTAL BACKDROP

The Australian dollar found support after the Chinese governments increased stimulus 1 trillion Yuan to tackle a vulnerable property market, COVID hit supply chains and more recently power disruptions in certain parts of China. The announcement coupled with the USD/CNY fix that was stronger than model projections sent a message out that the PBoC thinks the currency is depreciating against the U.S. dollar at an unwanted pace. Markets reacted favorably with Emerging Market (EM) and pro-growth currencies like the AUD strengthening – stronger commodity complex.

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The Chinese 5-year CDS (see graphic below) which is a traditional hedge against defaults now show a marked decline indicating that the Chinese government’s efforts to quell a property crisis may be working.

CHINESE 5-YEAR CDS CHART

china 5-year CDS

Source: Refinitiv

Later today, the last high impact data point ahead of the Jackson Hole Economic Symposium tomorrow comes via U.S. GDP (see economic calendar below) while the GDP deflator print may carry more weight this time round as inflation remains at the heart of the Fed’s agenda.

ECONOMIC CALENDAR

economic calendar

Source: DailyFX economic calendar

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TECHNICAL ANALYSIS

AUD/USD DAILY CHART

aud/usd daily chart

Chart prepared by Warren Venketas, IG

AUD/USD price action on the daily chart has bulls pushing towards the 0.7000 psychological resistance zone but I think we may not see this ahead of Jackson Hole. Markets remain tentative and this short-term rally may be cut short as we move through the EU and U.S. trading sessions respectively.

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Key resistance levels:

  • 0.7000/100-day EMA (yellow)

Key support levels:

  • 20-day (purple)/50-day EMA (blue)
  • 0.6900

IG CLIENT SENTIMENT DATA: BULLISH

IGCS shows retail traders are currently LONG on AUD/USD, with 59% of traders currently holding long positions. At DailyFX we typically take a contrarian view to crowd sentiment however, recent changes in long and short positioning results in a short-term bullish bias.

AUD/USD Bullish
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -4% 29% 3%
Weekly -7% 19% -1%
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Contact and follow Warren on Twitter: @WVenketas

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

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