Concerns about China weigh on the Aussie dollar

FacebookTwitterGoogle+PinterestTumblrStumbleUponRedditLinkedInDiggVKShare

​​​​The Australian dollar’s rally faltered yesterday despite positive business sentiment and signs of solid growth.

“The source of the Aussie dollar’s weakness is the enduring concerns about the outlook for the Chinese economy, particularly the transition away from the type of growth from which Australia has been a primary beneficiary,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
He added that rising US bond rates, which helped support the US dollar across the board, is another factor weighing on the Aussie dollar.

According to McKenna, the latest trade data from China suggested a turn in the economy toward weaker growth.

“Chinese trade yesterday was disappointing with the growth of imports (18.6% year-on-year) and exports (14.3% year-on-year) slowing sharply. That’s both against expectations but also from year-on-year the previous month,” McKenna said.

He pointed out that while Chinese authorities are winning the battle to put reserves under control, it has some market observers worried.

McKenna said, “It worries some that the Chinese economy could slow more sharply than they expected. And for Australia, it’s worth noting iron ore imports dipped back to October 2016 levels and copper imports fell 30% last month.”

At the same time, the US dollar is gaining ground against other currencies on the expectation that the US Federal Reserve will go for another rate rise in June 2017.

“So, it’s no real surprise that the Aussie dollar is back below 74 cents and trading at 0.7389 this morning,” McKenna said.

Today’s retail sales data for March will be important for traders because it will give a window into where consumers heads are really at.

READ  Spanish Model Combines 'Classic Beauty with a Strong Contemporary Edge' for Magazine Shoots

Looking at the charts there is no sign of a turn in the Aussie as it bumps along the bottom of the current downtrend. Support on the day is sitting at 0.7360/70 which is the bottom of the trend channel and Friday’s low.

According to McKenna, “The Aussie would need to get above 0.7430/35 to turn the outlook.”

********

About AxiTrader

Back in 2007, AxiTrader was founded on a simple idea: to be the broker we’d want to trade with. We’ve since grown to become one of Australia’s largest and leading Forex brokers.  Investing in over-the-counter derivatives carries significant risks and is not suitable for all investors. You could lose substantially more than your initial investment.



This post has been seen 540 times.