The Australian dollar hasn’t missed a beat on Monday after posting gains on Friday. Early in North American trade, AUD/USD is trading at 0.7296, up 0.45% on the day.
China Industrial Production rises
One factor which is in the Australian dollar’s favor is the improving Chinese economy. China is Australia’s largest trading partner, which makes the Australian currency sensitive to key Chinese releases. On Monday, China Industrial Production posted a strong gain of 6.9% for a second straight month, the highest gain reported in 2020. In October, Manufacturing and Services PMIs accelerated further into expansion territory and beat the forecasts, another sign that China’s economy is on the right track. In fact, China could well be the locomotive which pulls the rest of the global train out of the economic doldrums in 2021.
RBA minutes next
The Reserve Bank of Australia releases the minutes of its November policy meeting on Tuesday (00:30 GMT). At the meeting, the central bank trimmed interest rates from 0.25% to 0.10%, a historic low. The RBA opted not to cut rates in October, as the policy meeting came out on the same day as the government’s budget release. At the November meeting, in addition to lowering interest rates, the RBA also introduced QE for the first time in its history, announcing the purchase of $100 billion of government bonds over the next six months. Bank members have floated the idea of negative rates, a drastic concept which the country’s commercial banks would no doubt oppose. Negative rates would likely weigh on the Aussie, as it would become a less attractive asset for investors. However, if economic conditions do not worsen, the RBA will shelve the negative rate scenario.
- AUD/USD broke above resistance at 0.7277 in the Asian session. The next resistance line is at 0.7332, followed by resistance at 0.7395.
- We find support at 0.7214, followed by support at 0.7159
- AUD/USD has flirted with the 10-day MA line on Friday but remains above this line.
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