- AUD/USD remains supported just above the 0.7200 level in thin US holiday trading.
- The Australian dollar did not respond to mixed Chinese data or the latest PBoC rate cut.
The AUD/USD It is currently taking comfort just above the 0.7200 level, with the pair’s 21 and 50 day moving averages at 0.7211 and 0.7205 acting as magnets for price action for now. Trading conditions are calm at the moment due to the US markets closing for Martin Luthar King Jr. Day. For now, an uptrend bridging the Jan 7 and Jan 11 lows is helping to keep the pair above 0.7200. If this level and the moving averages break down, that would open the door for a quick retest of the 2022 lows in the 0.7150 zone.
AUD/USD, currently trading sideways on the session, failed to react to a mixed batch of Chinese economic data releases during the Asian session on Monday. While Chinese retail sales in December were weaker than expected, growing just 1.7% year-on-year (vs. 3.7% expected), industrial production growth rate for the same month was stronger than expected at 4.0 % YoY (vs. 3.6% forecast). China’s Q4 2021 GDP growth estimate was also released and despite falling to its lowest year-on-year rate since Q3 2020, it beat expectations at 4.0%.
In response to the latest batch of data, China’s PBoC lowered the interest rate on some 700 billion CNY (approximately $110.2 billion) in one-year medium-term loans to financial institutions to 2.85% from 2.95%. The latest move is emblematic of a continued push by Chinese authorities to ease fiscal and monetary conditions in the country to prop up growth; if they are successful in the coming months, this could boost the Australian dollar. For the rest of the week, amid no US level one data release or Fed statement, the main focus for AUD/USD traders will be on the Australian employment report from Thursday December. Employment data will be viewed in the context of how it affects the likelihood of the RBA scrapping the QE program altogether in February or continuing it through May.
Analysts are divided on what to expect from the meeting as Omicron rages in Australia but central banks elsewhere become more aggressive. In that sense, analysts at Westpac said on Monday that “with the Fed’s December meeting just over a week away and a likely aggressive outcome, it’s hard to see the US dollar giving up too much ground.” “We are not convinced that now is the time for a serious breakout to the upside in AUD and see it at risk of probing the $0.7100/50 region during the week,” they continued.
Technical levels
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