AUD/USD consolidates above 0.7200, unfazed by mixed-Chinese data/PBoC rate cut in thinned trade

AUD/USD is currently consolating just above the 0.7200 level, with the pair’s 21 and 50-day moving averages at 0.7211 and 0.7205 acting as magnets to the price action for now. Trading conditions are quiet at the moment given the closure of US markets for Martin Luthar King Jr Day. For now, an uptrend linking the January 7 and 11 lows is helping hold the pair to the north of the 0.7200 level. Should this level and the moving averages be broken to the downside, that would open the door to a swift retest of 2022 lows in the 0.7150 area.

AUD/USD, which currently trades flat on the session, did not react to a batch of mixed Chinese economic data releases during Monday’s Asia Pacific session. Whilst Chinese Retail Sales in December were weaker than expected, growing just 1.7% YoY (versus 3.7% forecasts), the rate of Industrial Production growth for the same month was stronger than expected at 4.0% YoY (versus 3.6% forecasts). China’s Q4 2021 GDP growth estimate was also released and, despite falling to its lowest YoY rate since Q3 2020, came in above expectations at 4.0%.

In response to the latest batch of data, China’s PBoC lowered the interest rate on some CNY 700B (roughly $110.2B) worth of one-year medium-term lending facility loans to financial institutions to 2.85% from 2.95%. The latest move is emblematic of a continued push by Chinese authorities to ease fiscal and monetary conditions in the country to shore up growth – if they are successful in the coming months, this could boost the Aussie. For the rest of the week, amid a lack of tier one US data releases or Fed speak, the main focus for AUD/USD traders will be on Thursday’s Australia December jobs report. The jobs data will be viewed in the context of how it impacts the likelihood that the RBA either axes is QE programme entirely in February, or continues it to May.

Analysts are mixed over what to expect from the meeting as Omicron rages in Australia but central banks elsewhere get more hawkish. On which note, analysts at Westpac said on Monday that “with the Fed's December meeting just over a week away and a likely hawkish outcome, it's hard to see the US$ giving too much more ground”. “We are not convinced that now is the time for a serious break higher in the AUD and see it at risk of probing into the $0.7100/50 region through the week,” they continued.