Bearish View
- Sell the AUD/USD and set a take-profit at 0.6850.
- Add a stop-loss at 0.7050.
- Timeline: 1-3 days.
Bullish View
- Set a buy-stop at 0.7015 and a take-profit at 0.710.
- Add a stop-loss at 0.6900.
The AUD/USD pair pared back some of the losses it made on Monday morning after the weak Chinese economic data. The pair rose to a high of 0.7011, which is slightly above last week’s low of 0.6832. It is hovering near the lowest level in July 2020.
Weak China Growth
Data published on Monday revealed that the Chinese economy continued to plummet in April due to the ongoing lockdown in Shanghai. Retail sales, which are an important reading of consumer spending, declined by a massive 11.1% in April. This decline was lower than the median estimate of -6.1%.
Further, the closely watched industrial production declined by 2.9% on a year-on-year basis. This figure was also significantly lower than the median estimate of an increase of 0.4%. Additional data showed that fixed asset investments rose by 6.8%.
These numbers show that the lockdowns have had a bad impact on the Chinese economy. This is notable since Australia sells most of their products to China.
The AUD/USD also reacted to the latest minutes by the Australian central bank. The minutes provided more color about the bank’s decision to hike interest rates earlier this month. The members also hinted that more rate hikes were on the way.
The next major catalyst for the pair will be the upcoming US retail sales, industrial production, and manufacturing production data from the US. Economists expect the data to show that the country’s retail sales declined in April as consumer inflation rose. Retail sales are an important gauge of the American consumer.
With the producer price index rising, there is a likelihood that industrial and manufacturing production declined in April. The pair will also likely react to the latest statement by Jerome Powell and Loretta Meister.
AUD/USD Forecast
On the 4H chart, we see that the AUD/USD pair has been in a bearish trend in the past few weeks. Now, the pair is attempting to stage a comeback as its price has risen from last week’s low of 0.6832. The pair has moved above the important resistance at 0.7036 and the 50-day moving average.
Therefore, this recovery should be taken with a grain of salt in the long-term. In fact, checking the weekly chart shows that the pair has just formed a bearish breakout below the support at 0.6983. As such, the pair will likely have a pullback as investors target the key support at 0.6850.
