AUD/USD remains on the 0.79 handle post disappointing China data

Currently, AUD/USD is trading at 0.7906, up +0.19% on the day, having posted a daily high at 0.7919 and low at 0.7887.

Data just in: China July retail sales rise 10.4% y/y; est. 10.8% and China July industrial output rises 6.4% y/y; est. 7.1% - There was little reaction though. 

AUD/USD has been elevated in Asia at the start of the week, soaking up the market's appetite for easing back on risk-off play while N.Korea takes a back seat with initial fears dampened, especially with N.Korean holiday coming up and less chance of missles being tested again on a national holiday, perhaps? 

PBOC sets the Yuan reference rate at 6.6601

US CPI was disappointing on Friday for an economy at full employment and 0.3% y/y core comeing in below the 2% target: "There are clear signs of broader deflationary pressures too ranging from electronics, to education, to medical services. And this is where it starts to get complicated for the Fed (and central banks in general to be fair as this is a global phenomenon) as it is becoming clear that secular forces (like technology) are playing a bigger role in the inflation (or lack thereof) generating process. We’re not convinced central banks should (or even can) attempt to stand in the way of these forces, which starts to then raise some pretty interesting questions about the validity of current inflation targets, or inflation-targeting in general (at least in its current form)," explained analysts at ANZ.

RBA's Kent: Will be some time before RBA normalizes rates

We now turn to the FOMC minutes and retail sales as two of the main highlights on the US calendar this week. 

AUD/USD levels

Analysts at Commerzbank argued that dips lower should find some support near term at 0.7836 the April 2016 high, currently we would allow losses to extend to the uptrend at 0.7773. "While above the uptrend at 0.7773 we will assume it is capable of further gains longer term. Intraday rallies are indicated to terminate circa 0.7870 Above 0.8100 targets the 0.8162/66 May 2015 peak and 50% retracement and this is capable of holding the initial test. Above here lies the 0.8295 January 2015 high, added the analysts. 


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