Australian dollar, AUD / USD, Chinese inflation, CPI, PPI – call points
- Australian dollar weakness in Chinese economic data
- China iinflation growth will slow to 0.8%, expected to 1.0%
- AUD / USD breaks below the 50-day SMA as the weakness persists
The Australian dollar changed little against the dollar US dollar after Chinese inflation and factory gate prices in August exceeded the wires. Chinese economic data often affects the Australian dollar because of the Australian dollar with China. China’s consumer price index (CPI) rose 0.8% last month, without a 1.0% consensus forecast. Factory prices, measured by the producer price index (PPI), increased by 9.5% over the same period, exceeding forecasts requiring a 9.0% increase.
Chinese policymakers see rapid price rises as a direct threat to growth. Covid-induced supply bottlenecks, mining and agricultural disruptions, as well as port and rail closures, brought many commodity prices to or near record levels earlier this year. However, the revival of the Covid cases, driven by the Delta option, has slowed growth forecasts, leading to a slight rise in prices. This, in turn, helped ease the pressure on Chinese policymakers to tackle the rise of commodities such as iron ore and sky earlier this year. copper – Both are crucial for China’s recovery.
Bets on whether Beijing will take steps to provide additional support to the economy fell earlier this week as China announced a better-than-expected trade balance. Today’s consumer price index is likely to help cool these stakes even further. A higher-than-expected PPI is likely to keep Chinese regulators on their toes. Analysts disagree on whether the People’s Bank of China (PBOC) could cut the minimum reserve ratio (RRR) this month. Such a step would deepen the liquidity of the Chinese financial system. PBOC last cut RRR in July.
Differences in the growth trajectory between inflation and ex-factory prices compared to these projections suggest that producers are keeping costs unintentional to consumers. This probably reflects the view that factories consider their input costs to be temporary and are able to pass on these higher prices within their profit margins.
The scarcity of raw materials and the progress of the global vaccination campaign are a good indication that input prices are cooling. When commodity prices have fallen when looking at a basket of goods, including steel and agricultural products, factory savings are not immediate. This is due to the fact that most producers usually secure prices with contracts months in advance. This means that if raw materials remain depressed, it is reasonable to expect factory prices to fall in the coming months. This may not be good for the Australian dollar, as less stimulus to the Chinese economy could weaken demand for Australian imports.
AUD / USD technical forecast
AUD /USD was unable to change the direction of the Chinese data today. However, the downside seems to be confusing. The currency pair has been on a downward trend since the beginning of this week. The bear’s gripping candlestick set the start of the movement lower. 38.2% Fibonacci retracement from August / September moving can provide support. Below this is the trend line from July. RSI and MACD are both lower, indicating that the rate of decline may continue. The recent break of an SMA of less than 50 days is also bad for the outlook.
AUD / USD 6-hour chart
The chart has been created TradingView
– Written by Thomas Westwater, DailyFX.com analyst
Be in touch Thomas, use the comments section or below @FxWestwaterTwitter