As investors analyze the potential effects of the Australian inflation figures on the Reserve Bank of Australia’s rate decisions, attention is also focused on China. In particular, the industrial profit numbers from China play a crucial role in shaping buyer sentiment towards the Australian dollar.
Economists are predicting a 4.1% year-on-year increase in Chinese industrial profits for the month of May, following a 4.3% rise in April. These figures are closely monitored as they provide insights into the health of the Chinese manufacturing sector. Any unexpected downturn in industrial profits could paint a bleak picture for the sector, with potential repercussions for the Australian economy.
Significance of Chinese Economic Indicators for Australia
Given that China accounts for approximately one-third of Australian exports, indicators from the Chinese economy hold significant importance for Australia. With more than 20% of the Australian workforce employed in trade-related jobs, any negative trends in the Chinese economy can have a direct impact on the demand for Australian goods and services. This, in turn, can influence the performance of the Australian economy and the value of the Aussie dollar.
US Economic Indicators and the Fed Rate Path
While investors pay close attention to data from Australia and China, the economic indicators from the United States also play a key role in shaping market sentiments. In particular, upcoming data on US jobless claims will be closely watched, with economists forecasting a slight decrease from 238k to 236k in the week ending June 22. Any unexpected changes in jobless claims can impact investor expectations regarding a potential rate cut by the Federal Reserve.
The divergence in monetary policy between major economies like Australia and the United States can influence the relative strength of the Aussie dollar. In the event of softer-than-expected US inflation numbers, market sentiment may shift towards the Australian currency. Moreover, the Monthly CPI Indicator in Australia has already increased bets on a rate hike by the Reserve Bank of Australia in August. On the other hand, hopes of a rate hike by the Federal Reserve in September will largely depend on the upcoming US inflation data.
Technical Analysis of AUD/USD
From a technical perspective, the AUD/USD pair has been showing bullish signals, remaining above both the 50-day and 200-day Exponential Moving Averages (EMAs). A breakout above the $0.66500 level could potentially lead to a move towards the $0.67003 resistance level, with further upside towards $0.67500. However, a break below the 50-day EMA could signal a decline towards the 200-day EMA and the $0.65760 support level.
The industrial profit numbers from China and economic indicators from the United States play a crucial role in shaping investor sentiment towards the Australian economy and the Aussie dollar. As market participants await key data releases, the near-term trends in AUD/USD will be driven by a combination of domestic and international factors. With various factors at play, it is important for investors to carefully analyze the evolving economic landscape to make informed trading decisions.
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