- AUD / USD down 10 pips despite better than expected Chinese data.
- Commercial sentiment is waning in the hope of further stimulus and fears of a wave of virus 2.0.
- The PBOC kept the interest rate unchanged despite broad expectations of lower rates.
- Consumer-focused U.S. data will be key, not to mention the following business / viral updates.
The AUD / USD fell more than 10 pips from 0.6467 to 0.6452, currently around 0.6465, after the release of April data for China. A larger than expected drop in retail sales and capital investment seems to have dominated industrial production more than expected.
While the largest customer figures seem to have challenged the pullbck movements of 0.6400, Thursday’s low, hope for a new revival of the United States limit the disadvantages of the pair.
In addition to optimistic data and optimistic trade sentiment, an announcement by the People’s Bank of China (PBOC) that the rate will not change also appears to have depicted the Aussie moves late. The PBOC maintained its interest rate on a one-year unchanged medium-term credit facility (MLF) at 2.95% despite earlier expectations of a rate cut.
Despite this, an escalation of cases of coronavirus (COVID-19) maintains fears of the wave of virus 2.0, which in turn weighs on the risk barometer (the AUD / USD pair). In addition, the tension between the United States and China also calls into question the pair.
After Originally Allegating China For The Virus Epidemic And Taking Negative Action For Trade, US Policymakers Show Their Dislike For The Asian Nation By Passing A Bill That Could Impose Sanctions On Chinese Officials Involved In The Case Xinjiang. In addition, fears are also looming as a separate Republican bill is being prepared that will allow President Trump to sanction the dragon nation if he does not cooperate in the investigation of the virus epidemic.
That said, yields on 10-year US Treasuries remain positive above 0.62%, while Asia Pacific stocks also posted slight gains at press time.
Continuing, traders will keep their eyes on qualitative catalysts for a new boost ahead of the busy US economic calendar including April retail sales and the Michigan Consumer Sentiment Index. “April retail sales will open a day of important outings. Westpac is looking for a record monthly drop of -13.0% as the foreclosure crushes the retail business. Likewise, industrial production in April should record the largest drop in the centenary history of the survey (market f / c -12.0%). Against this backdrop, March’s business inventories will continue to relax (market f / c -0.2%). However, the University of Michigan consumer confidence index for May is expected to deteriorate further to 68.0, “said analysts at Westpac.
Unless there is a clear break below the confluence of the 21-day SMA and an 18-day uptrend line, currently near 0.6440, bears may be hesitant to enter. Alternatively, a weeklong downtrend line near 0.6490 protects the pair’s immediate rise before the May 11 high of 0.6562.