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Australian Dollar Forecast: China Trade Balance in Focus After Iron Ore Prices Rebound

Australian Dollar Forecast: China Trade Balance in Focus After Iron Ore Prices Rebound

Thomas Westwater, Analyst

Australian Dollar, AUD/USD, China Trade Balance, Earnings, Technical Outlook - Talking Points

  • Asia-Pacific markets aim to extend last week’s rally after US stocks surged on Friday
  • China’s October trade data is on tap as a potential policy pivot underpins sentiment
  • AUD/USD eyes 50-day SMA after prices breakout from a Cup and Handle pattern
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Monday’s Asia-Pacific Outlook

A mixed US jobs report on Friday sent the US Dollar and Treasury yields lower while equity indexes surged. Asia-Pacific stocks put in healthy gains, with China’s tech-heavy CSI-300 Index rising 6.38% and Hong Kong’s Hang Seng Index (HSI) closing 8.73% higher. The China-sensitive Australian Dollar rose for the third week, supported by higher iron ore prices.

China’s October trade balance is on tap today. Analysts expect the country’s trade balance to grow from $84.7 billion to $95.9 billion. That would bode well for China’s economic outlook after October PMI data showed a contraction in the country’s manufacturing sector. The Chinese Yuan rose over 1% against the Greenback. A Reuters report suggests that China may soon ease its “Zero-Covid” policies, which are among the strictest in the world.

Later this week, traders will digest China’s inflation rate and credit growth data for October. The CPI gauge is expected to post a 0.4% month-over-month increase, and new Yuan loans (a measure of bank-issued credit growth) are slated to cross the wires at 800 billion Yuan, according to estimates. Those events may shift sentiment across the APAC region. The US CPI data on Thursday offers this week’s main event.

An earnings report from Coal India—the world’s largest coal miner—should show healthy growth after thermal coal prices surged during the company’s reporting period. Elsewhere, ANZ will announce Australian job advertisements for October, and Indonesia’s third-quarter growth rate will cross the wires at 02:00 UTC.

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Australian Dollar Technical Outlook

A Cup and Handle breakout occurred after prices pierced above resistance. The falling 50-day Simple Moving Average (SMA) is in focus as a potential point of resistance. A break above the SMA would likely encourage additional upside in a possible reversal of the pattern’s preceding downtrend.

AUD/USD 6-Hour Chart

aud-usd chart

Chart created with TradingView

--- Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter

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

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