The Australian dollar has momentarily halted its downward trajectory against the US dollar, stabilizing around the 0.6565 mark. With a lack of significant domestic data from Australia, the AUD’s movements are largely influenced by the performance of the Chinese yuan and economic developments from China. Recently, the offshore yuan weakened to its lowest in a week at 7.2 against the US dollar, following a series of macroeconomic updates from China.
China’s industrial output showed an impressive year-on-year increase of 7.0%, exceeding both the anticipated 6.5% growth and the previous rate of 4.6%. Capital investment also outperformed expectations, registering a 4.2% year-on-year rise compared to the forecasted 3.2%. Retail sales growth in February was reported at 5.5% year-on-year, albeit a slowdown from January’s 7.4% increase. Additionally, the January employment report indicated a slight uptick in unemployment, rising to 5.3% from the prior 5.1%.
Despite these positive indicators from China, the yuan’s valuation remains pressured by robust US inflation data, which complicates the Federal Reserve’s pathway to easing monetary policy. The prevailing market expectation now leans towards a potential 25 basis point rate cut by the Fed in June, with around a 60% probability of this outcome, a shift from earlier predictions of a spring rate cut.
Given Australia’s close economic and trade ties with China, these statistics from China are particularly significant for the AUD’s performance.
Technical analysis of AUD/USD
The H4 chart analysis of AUD/USD indicates a consolidation phase around the 0.6570 level, with expectations of a downward breakout leading to the continuation of the decline towards the local target of 0.6506. After reaching this target, a potential corrective movement to 0.6570 (testing from below), followed by a further drop to 0.6477, is anticipated. The MACD indicator, with its signal line pointing downwards, supports this bearish scenario.
On the H1 chart, the AUD/USD pair has concluded its declining wave structure at 0.6570, with a consolidation phase currently observed around this mark. A downward breakout from this consolidation is expected today, aiming for the 0.6506 level. Upon achieving this target, the onset of a corrective phase to 0.6570 (testing from below) may be considered. The Stochastic oscillator, currently above 80 and poised to descend to 20, corroborates the likelihood of this continuation in the bearish trend.
