AUD/USD – Australian dollar steady, investors eye Chinese CPI

AUD/USD has ticked higher in the Wednesday session. Currently, the pair is trading at 0.7003, up 0.08% on the day. On the fundamentals front, there are no Australian releases. China posted a trade surplus of 94 billion yuan ($13.8 billion), in April, well short of the forecast of 235 billion yuan ($33.7 billion). On Wednesday, Chinese CPI is projected to improve to 2.5% in April. In the U.S., there are no key events until Thursday, with the release of producer price index reports and unemployment claims. The RBA issues its monetary policy statement, which is released quarterly.

The trade war between the U.S. and China has taken a heavy toll on the Chinese economy. China’s trade surplus fell sharply in April, dropping from 221 billion yuan to 94 billion ($32.6 billion to $13.8 billion). As well, Chinese exports declined 2.7% in April, on a year-to year basis. This was a sharper drop than the estimate of a 2.3% decline. A slowdown in China has damaged the Australian economy, as China is Australia’s number one trading partner.

The RBA held the course on Tuesday, surprising the markets, which had expected the bank to cut rates to 1.25%. The markets had priced in a rate cut at close to 50%, so the decision to hold rates boosted the Aussie as much as 1.0%. in the Asian session. However, the currency was unable to consolidate and gave up most of these gains in European trade. Despite a slowdown in economic activity and weak inflation, the RBA is sticking to its wait-and-see stance, hopeful that the economy will find its feet without the help of a rate cut.

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AUD/USD Fundamentals

Tuesday (May 7)

• 23:01 Chinese Trade Balance. Estimate 235B. Actual 94B

Wednesday (May 8)

• 8:30 US FOMC Member Brainard Speaks
• 10:30 US Crude Oil Inventories
• 13:01 US 10-year Bond Auction
• 21:30 Chinese CPI. Estimate 2.5%

Thursday (May 9)

• 8:30 US PPI. Estimate 0.2%
• 8:30 US Core PPI. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 215K
• 21:30 RBA Monetary Policy Statement

*All release times are DST

* Key events are in bold

AUD/USD for Wednesday, May 8, 2019

Open: 0.7012 High: 0.7027 Low: 0.6995 Close: 0.7003

AUD/USD Technical

AUD/USD posted slight losses in the Asian session but has given these up in European trade

• 0.6970 is providing support
• 0.7085 is the next resistance line
• Current range: 0.6970 to 0.7085

Further levels in both directions:

• Below: 0.6970, 0.6825 and 0.6744
• Above: 0.7085, 0.7190, 0.7240, and 0.7315

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