Aussie finishes strong in 2022

The Australian dollar has been rising since last Friday and is in positive territory today. In the European session, AUD/USD is trading at 0.6801, up 0.37%.

The final week of the year, bookended by Christmas and New Year’s, is usually quiet, with reduced trading volumes and a very light economic calendar. Still, the Australian dollar managed to put together an end-of-the-year rally, rising around 2% since December 23rd.

Australia watching China reopening

In a week short on economic news, one of the highlights was China’s announcement that international tourists would no longer be required to enter quarantine upon arrival. This marks another step in China’s rush to reopen, a massive shift from its harsh zero-Covid policy that choked economic activity. The pivot is expected to invigorate China’s economy, which has been experiencing a slowdown. The reopening policy is expected to boost the economy in the long term but has already led to a surge in Covid cases. This has kept many people indoors, hurting businesses, and many workers have reported being sick, which has reduced factory production. The reopening has been abrupt and chaotic, and that is likely to result in a contraction in GDP in the first quarter of 2023. China’s economy is, however, expected to recover, and HSBC is projecting 5% growth for 2023.

Australia is watching these developments closely. China is Australia’s largest trading partner, and how well China’s economy performs can have a strong impact on the direction of the Australian dollar. If China’s economy contracts in Q1, Australian exports will suffer and the Australian dollar could be in for a bumpy start to the year.

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AUD/USD Technical

• AUD/USD has support at 0.6703 and 0.6620
• There is resistance at 0.6841 and 0.6969

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