Chinese Data Reports Over The Weekend Put Pressure On The Australian Dollar
The early Sydney morning saw binary options traders wake up to a new figure being taken out in the AUD/USD pair. The US dollar extended its recovery pretty much across the board in Asia on Monday. The pair gapped almost 100 pips from Friday’s closing levels around 0.95, finding support at 0.9390 to stage a corrective rebound as Japan opened.
China's economic growth will drop even more
The Aussie rallied as high as 0.9466 before being pressured down again as traders in Australia started to scale down their books. As of writing the price is hovering around 0.9420 having found support just above the figure around 0.9405.
The main factor behind the slump was a raft of Chinese data over the weekend. The outlook is confirming that China's economic growth will drop even more in the second quarter and full-year expectations will be scaled back further, after data on Saturday and Sunday showed a slowdown in domestic activity as well as exports which are having a hard time picking up.
Evidence suggests that Chinese economic growth is rapidly losing steam. Despite that Premier Li Keqiang attempted to reassure markets by stating that the economy was stable and that economic growth was within a "relatively high and reasonable range".
So far this year data outlines that the pace has dropped further from the 2012 7.7% growth rate, triggering speculation by various analysts that the target growth rate for this year which is at 7.5 percent for 2013 could be missed.
China's consumer inflation slowed to 2.1 percent, which is the lowest reading in three months, while producer prices (PPI) were reported at -2.9 percent, the lowest since September. Expectations prior to the numbers were for consumer inflation at 2.5 percent and producer prices down 2.5 percent.
Meanwhile the Chinese Central bank reported Chinese banks made 667.4 billion yuan ($109 billion) in new loans in May, way short of market expectations of 850 billion yuan and much lower from levels seen in April, when 792.9 billion yuan were loaned out.
M2 money supply figures rose 15.8 percent from a year earlier, which was only slightly below a median forecast of 15.9 percent, but total social financing, which is a general measure of cash in the economy, was a mere 1.19 trillion yuan versus 1.75 trillion yuan announced in April’s data.
Retail sales, fixed-asset investment and industrial output met expectations, rising 12.9 percent, 20.4 percent and 9.2 percent from a year earlier, which were also lower than consensus estimates. With economic growth slowing down to 7.7 percent in the first quarter, which is down from the 7.9 percent seen in Q4 2012 both the IMF and the OECD have reduced their GDP forecasts for China's in 2013 to 7.75 percent and 7.8 percent respectively.
All of this is playing out into the hands of commodity currencies bears which are having a party selling NZD and AUD in recent weeks. One can argue that5 this has all been expected yet we can hardly see any strength in the Aussie for now. Nevertheless we would be cautious in selling puts from here. In fact we favor buying calls into the European markets on any drop towards previous lows at 0.9405 and 0.9390.
As we look at the chart on the topside we do have some targets that can be reached and provide selling pressure on the AUD/USD binary trading. First upside target is at 0.9460, with the second being closely after at 0.95, which would fill the gap from early Australian trading. The main reasoning behind this trade idea is that with such low data the Chinese authorities could cut interest rates sometime during the day (or the week) and therefore provide support for the Australian dollar proxy trade.