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AUD/USD: bulls at new highs after Chinese inflation

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 9, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Guatemala) - China's trade data in CPI and PPI was expected with the former edging up to 1.4% y/y while the latter was expected to see deflation deepen further to -6.0% y/y. The data arrived 0.1% higher for CPI and 0.1% lower for PPI.

    Analysts at Rabobank explained the spread is enormously problematic. "Imagine that you have huge debts, slack external demand, masses of domestic competition, and are having to slash your output prices by 6.0% y-o-y while giving pay rises to staff based on at least 1.4% y-o-y CPI expectations (and often more). Does that sound sustainable? Not without lower interest rates and a lower currency."

    For the Aussie, AUD/USD is a touch firmer and making fresh highs for the overnight shift in the US and Asia. Meanwhile, the pair was better bid on the home loans data beating expectations -0.5% vs -1.0% m/m. However, the consumer confidence was a slight disappointment for Dec at 100.8 vs prior 101.7. Commodities are now likely to be the driver again ahead of the jobs data tomorrow from Australia and then the FOMC showdown next week.

    AUD/USD levels

    Any progression on the upside is not particularly compelling until a break of 0.7451 200 DMA. 0.7291 and the 100 SMA on the 1hr time frame is first major hurdle getting there before 0.7385 and 4th Dec highs. To the downside, the Classic S1 stands at 0.7156 below the 100 DMA at 0.7190 coming in as a critical level on overnight lows. 0.7180 is the point at which the price rallied in late November trade to recent highs and should be a strong level of support. Below it lies the 0.7017 November low and the September low at 0.6940.
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