AUD/USD declines after downbeat Chinese activity numbers

Having offered a muted response to quarterly wage data, the AUD/USD pair slumped to the intra-day low of 0.6777 after China’s key activity data disappointed during early Wednesday.

China’s July month YoY data reveals that the Retail Sales grew 7.6% versus 8.6% forecast whereas the key Industrial Production growth came in as 4.8% against 5.8% expected. Previously, Australia’s second quarter (Q2) Wage Price Index grew 0.6% compared to 0.5% market consensus on a QoQ basis.

Having portrayed a positive reaction to the US-China trade news on Tuesday, the pair stopped during early morning hours as the absence of any fresh trade clues and tension surrounding Hong Kong kept market sentiment in check.

Cautious sentiment ahead of activity data from the key customer also tamed market reaction to better than 0.5% forecast of Wage Price Index growth of 0.6% (QoQ).

It is also worth noting that the Refinitiv data shows that the US treasury yield curve portraying the difference between the 10-year and two-year yields is the narrowest since June 2007. A crossover of 2-year yields to the 10-year counterpart is generally considered as a signal for the global recession.

Traders will now focus on the speech by the Reserve Bank of Australia’s (RBA) Assistant Governor (Risk Management Committee) Guy Debelle for the central bank’s reaction to the latest data releases. Meanwhile, the trade/political news can keep entertaining market players amid a lack of major data from the US.

Technical Analysis

Sellers keep their eyes on 0.6745/50 area comprising latest lows except for July 07 plunge, as a break of which opens the door for the fresh downside to 0.6700 and a multi-year low of 0.6677. Alternatively, 0.6822, June low of 0.6831 and 21-day exponential moving average (EMA) level of 0.6850 become nearby resistances to watch.