AUD/USD pauses recoveries beyond 0.6400 after China data dump

• AUD/USD drops 10 pips to despite better than forecast China data.
• Trade sentiment dwindles amid the hopes of further stimulus and fears of virus wave 2.0.
• PBOC kept interest rate unchanged despite wide forecasts of a rate cut.
• US Consumer-centric data will be the key, not to forget following trade/virus updates.

AUD/USD drops over 10-pips from 0.6467 to 0.6452, currently around 0.6465, following China’s April month data dump. A higher than expected drop in Retail Sales and Fixed Asset Investments seem to dominated over better than forecast Industrial Production.

Read: China’s April data dump: Mixed Retail Sales and Industrial Production numbers – Aussie revisits lows

While the numbers from largest customer seems to have challenged the pullbck moves from 0.6400, Thursday's low, hopes of further stimulus from the US limit the pair's downside.

Other than the downbeat data and upbeat trade sentiment, a no rate change announcement from the People’s Bank of China (PBOC) also seems to have portrayed the Aussie moves off-late. The PBOC kept its interest rate on a one-year Medium-Term Lending Facility (MLF) unchanged at 2.95% despite earlier forecasts of a rate cut.

Even so, an escalation of the coronavirus (COVID-19) cases keeps the fears of virus wave 2.0 alive, which in turn weighs on the risk barometer (the AUD/USD pair). Further, the tension between the US and China also challenges the pair.

Having initially alleged China for the virus outbreak and embarked on the trade-negative measures, US policymakers are showing their dislike for the Asian nation via passing a bill that could levy sanctions on Chinese officials involved in the Xinjiang case. Additionally, fears are also looming as a separate Republican bill is in the pipeline that will enable President Trump to sanction the dragon nation if it doesn’t cooperate in the virus outbreak investigation.

That said, US 10-year Treasury yields remain positive above 0.62% while Asia-Pacific shares also post mild gains by the press time.

Moving on, traders will keep eyes on the qualitative catalysts for fresh impulse ahead of the busy US economic calendar comprising April month Retail Sales and Michigan Consumer Sentiment Index. “ April retail sales will open a day of important releases. Westpac is looking for a record monthly decline of -13.0% as the lockdown crushes retail trade. Similarly, April industrial production is expected to post the largest fall in the century-long history of the survey (market f/c -12.0%). Against this backdrop, March business inventories will continue to unwind (market f/c -0.2%).  However, the May University of Michigan consumer sentiment index is expected to deteriorate further to 68.0,” said analysts at Westpac.

Technical analysis

Unless providing a clear break below the confluence of 21-day SMA and an 18-day-old rising trend line, currently near 0.6440, the bears may hesitate to enter. Alternatively, a one-week-old falling trend line near 0.6490 guards the pair’s immediate upside ahead of the May 11 high of 0.6562.