AUD/USD Forecast: Chinese slowdown hits the Aussie

Valeria Bednarik FXStreet

AUD/USD Current price: 0.7159

Chinese data pointed out a further economic slowdown in China with Retail Sales up by just 8.6%.
US Retail Sales and the Markit PMI indexes to be out today.

The AUD/USD pair fell to a fresh 4-week low in the 0.7150 price zone, sharply down this Friday on the back of soft Chinese data and cooling hopes for an easy end to the US-China trade war. According to official releases, Chinese Retail Sales increased by 8.1% YoY in November, well below the previous 8.6% or the expected 8.8%. Industrial Production in the same period rose 5.4%, also falling short from the market's expectations of 5.9%, and the previous 5.7%. After two decades of sharp expansion, growth in the world second's largest economy has slowed sharply, and this data just confirms it. Australian mining-based economy is quite dependent on the Asian giant, which consumes most of its production. When China sneezes, Australia is the first to get a cold. Meanwhile, the arrest of Huawei's CFO in Canada for extradition to the US, and China arresting a couple of Canadian diplomats arise concerns about the future relationship of the two countries.

The greenback is stronger across the board, as Brexit chaos and soft EU data, fuel risk-off. Later today, the US will publish November retail sales, foreseen rising 0.2% vs. the previous 0.8%. The core reading, so-called Retail Sales Control Group, is expected up 0.4% vs. the previous 0.3%. The country will also release Industrial Production and Capacity Utilization for November, and the preliminary December Markit PMI.

The pair is now pressuring the 61.8% retracement of the 0.7020/0.7393 rally, at 0.7160, firmly bearish according to the 4 hours chart, given that technical indicators have extended their declines, heading sharply south within negative ground. In the mentioned chart the pair is also below all of its moving averages, with the 20 SMA gaining bearish traction below the larger ones. Despite having already lost over 60 pips daily basis, largely surpassing its daily average range for this week, further declines are likely with the next support now at 0.7140, en route to 0.7110.

Support levels: 0.7140 0.7110 0.7080

Resistance levels: 0.7175 0.7220 0.7250

View Live Chart for the AUD/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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