AUD/USD Eyes Chinese Credit Data After Bullish Candlestick Formation

Australian Dollar, AUD/USD, Japan Election, New Yuan Loans, Technical Outlook – Talking Points

• Australian Dollar trades against falling iron ore prices as APAC trading kicks off
• China’s new yuan loans eyed after inflation data rises more than expected
• AUD/USD targets 12-day EMA after Bullish Engulfing signals possible reversal

Asia-pacific traders are digesting economic and political headlines that dropped over the weekend. Japan’s Liberal Democratic Party (LDP) and Komeito, its junior partner, consolidated power on Sunday in the House of Councillors election, according to exit polling. The LDP-Komeito coalition won more than 75 seats, bolstering its majority power in the 248-member upper chamber. The victory comes days after the assassination of Shinzo Abe, the former Prime Minister and influential LDP party member. The Japanese Yen was little changed in early trading.

China released inflation data for June on Saturday. Consumer prices grew more than expected, rising 2.5% year-over-year and beating the 2.4% consensus forecast, according to The National Bureau of Statistics (NBS). Factory-gate prices via the producer price index (PPI) rose 6.1% y/y, down from 6.4% in May but beating the 6.0% analysts were expecting. The Australian Dollar may benefit if China’s credit data beats analysts’ expectations. Alternatively, AUD-friendly iron ore prices are lower this morning, extending losses from Friday.

The higher-than-expected data on prices is unlikely to cool bets for easing monetary and fiscal policy. The People’s Bank of China (PBOC) is expected to keep its one-year loan prime rate unchanged on Friday. Policymakers appear focused on directly boosting funding in the economy rather than lowering interest rates. Beijing is said to be planning a move to allow local governments to issue up to 1.5 trillion Yuan in special bonds through this year to boost infrastructure spending. New Yuan loans due out this week are expected to show an increase in June to 2.4 trillion Yuan, according to a Bloomberg survey. That would be up from May’s 1.9 trillion Yuan.

New Zealand’s electronic retail card spending for June rose by 0.1% m/m, down from +1.8% in May. The Reserve Bank of New Zealand (RBNZ) is seen hiking its benchmark rate by 50 basis points (bps) on Wednesday, according to a Bloomberg survey. The New Zealand Dollar is down over 5% from its May peak versus the Dollar despite an aggressive RBNZ. Japan will see machinery orders for May and machine tool orders for June cross the wires this morning.

Notable Events for July 11:

• Japan – Machinery Orders YoY (May)
• Indonesia – Retail Sales YoY (May)
• Japan – Machine Tool Orders YoY) (June)

Click here to view today’s full economic calendar

AUD/USD Technical Forecast

AUD/USD bears grappled with a trendline from the October 2021 swing high, but prices managed to rise late in the week. The formation of a Bullish Engulfing Candlestick on Thursday, which may suggest that the preceding downtrend may reverse. The 12-day Exponential Moving Average (EMA) has resisted prices over the last several weeks. A break higher would bring the 23.6% Fibonacci retracement and the 20-day Simple Moving Average (SMA) into focus.

AUD/USD Daily Chart

Chart created with TradingView

— Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter