AUD/USD analysis: Chinese data points to another leg lower

AUD/USD Current price: 0.7197

• Tensions between the US and China are nowhere near an end.
• AUD/USD bearish potential to increase on a break below 0.7170 the immediate support.

The Aussie traded accordingly to US-China trade war headlines, with the AUD/USD pair finishing the week around the 0.7200 level, barely holding above a 3-week low of 0.7191. The positive momentum triggered by the trade truce between the US and China was reversed after Canada detained Huawei CFO for his extradition to the US, accused of fraud, on fears this case will ramp up trade tensions between the two countries. The sell-off in Wall Street added to Aussie weakness despite the greenback self-weakness. Chinese data released during the weekend showed that the trade surplus in the Asian giant grew to $44.7 billion, while the trade surplus with the US almost $35.6%, as exports increased by 9.8% while imports fell by a whopping 25%. Inflation, however, fell monthly basis amid weak demand and falling oil prices, down 0.3% in November, and leaving an annual reading of 2.2%. So, the Chinese economy keeps slowing and the situation with the US is not close to an end, drawing a gloomy picture for the AUD.

The pair is technically bearish according to the daily chart, as the pair broke below the 20 and 100 SMA by the end of the week, with the largest one providing an intraday resistance at 0.7240, while technical indicators settled near their weekly lows, the RSI maintaining a strong bearish momentum, in line with further declines ahead. In the 4 hours chart, the bearish case is even stronger, as the pair finished below all of its moving averages and with the 20 SMA heading sharply, having already crossed below the 100 SMA, while technical indicators resumed their declines within negative levels after correcting extreme oversold conditions.

Support levels: 0.7175 0.7140 0.7100

Resistance levels: 0.7210 0.7250 0.7300    

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