China GDP Numbers: THE Reversal for the Aussie?
Next week I will be focused on AUD/USD for a few reasons.
Although straight forward data such as Australian employment change and business confidence numbers on Thursday will surely have an impact on the Aussie, what I'm more focused on is the systemic impact that Chinese GDP numbers will have on Monday.
Monday morning, China's Q2 GDP, as well as a host of other important readings for June, will hit the wires at 02:00 UTC.
It's important to understand how dependent Australia is on China. They are the largest destination for outbound goods and services for Australia, accounting for approx. 1/3rd of every dollar that is exported each year. The record-breaking period of expansion seen by Australia is directly accredited to its dependability on China. For example, this was in direct correlation to China giving loans --some of which were interest-free-- to Australia during and after the Great Recession; a term called "debt-trapping diplomacy" (Chan 2018). Australia clearly has benefited from this, however, it also has its negatives that I believe will prove to be detrimental to the Aussie-dollar beginning next Monday if China's GDP numbers print unexpectedly low.
The Aussie will be the direct and most significant target for these numbers and I can assure you with a guarantee it will move the candle. Fed expectations driving the Greenback lower over the last week is old news and eyes will be shifted back to 'trade wars' between the U.S. and China, growth, and earnings from U.S. equities.
I will be paying close attention to AUD/USD, as a deterioration of Chinese GDP could be the catalyst for one of the cleanest long term reversals seen by the Aussie since 2017. An extended bear trend, a clear descending wedge, an inverse head & shoulder (short term), and a 200-day moving average looming above are all technical reversal formations that I have my eyes on. This is the same setup that we identified earlier this summer with EUR/USD in which is broke to the upside after a 6-month decline.
Can this be the catalyst for an AUD reversal? It will be very tuff to trade this pair following Monday's GDP number, but I am nevertheless eager to trade the reaction and not the news.
Although straight forward data such as Australian employment change and business confidence numbers on Thursday will surely have an impact on the Aussie, what I'm more focused on is the systemic impact that Chinese GDP numbers will have on Monday.
Monday morning, China's Q2 GDP, as well as a host of other important readings for June, will hit the wires at 02:00 UTC.
It's important to understand how dependent Australia is on China. They are the largest destination for outbound goods and services for Australia, accounting for approx. 1/3rd of every dollar that is exported each year. The record-breaking period of expansion seen by Australia is directly accredited to its dependability on China. For example, this was in direct correlation to China giving loans --some of which were interest-free-- to Australia during and after the Great Recession; a term called "debt-trapping diplomacy" (Chan 2018). Australia clearly has benefited from this, however, it also has its negatives that I believe will prove to be detrimental to the Aussie-dollar beginning next Monday if China's GDP numbers print unexpectedly low.
The Aussie will be the direct and most significant target for these numbers and I can assure you with a guarantee it will move the candle. Fed expectations driving the Greenback lower over the last week is old news and eyes will be shifted back to 'trade wars' between the U.S. and China, growth, and earnings from U.S. equities.
I will be paying close attention to AUD/USD, as a deterioration of Chinese GDP could be the catalyst for one of the cleanest long term reversals seen by the Aussie since 2017. An extended bear trend, a clear descending wedge, an inverse head & shoulder (short term), and a 200-day moving average looming above are all technical reversal formations that I have my eyes on. This is the same setup that we identified earlier this summer with EUR/USD in which is broke to the upside after a 6-month decline.
Can this be the catalyst for an AUD reversal? It will be very tuff to trade this pair following Monday's GDP number, but I am nevertheless eager to trade the reaction and not the news.