AUD/USD retreats to 0.7150 area as USD continues to gather strength

Aussie fails to take advantage of the Chinese data.
US Dollar Index starts the week on a positive note.
Trading action in the second half of the day is expected to remain subdued.

Eren Sengezer FXStreet

Following a short-lived climb up to the 0.7180 area in the Asian session, the AUD/USD pair lost its traction and moved into the negative territory as the greenback started to outperform its rivals. As of writing, the pair was losing 0.3% on a daily basis at 0.7147.

Earlier today, the data from China showed that industrial production expanded by 5.7% on a yearly basis in 2018 to beat the market expectation of 5.3%. However, other data confirmed the economic slowdown with the quarterly GDP growth ticking down to 1.5% on a quarterly basis. On the same note, the IMF has announced that it cut the 2019 world growth outlook to its lowest level since 2015 at 3.5%.

On the other hand, with major European currencies struggling to stage a meaningful recovery, the dollar stays strong on the day to further weigh on the pair. Despite a lack of significant macroeconomic data releases from the U.S. on Monday, the US Dollar Index, which tracks the greenback against a basket of six major currencies, pushed higher after closing the previous week in the positive territory and touched its highest level in more than two weeks at 96.42.

With American markets staying closed due to the Marthin Luther King Jr. Day on Monday, the trading action is likely to be subdued in the second half of the day.

Technical levels to consider

The pair could face the immediate resistance at 0.7165 (50-DMA) ahead of 0.7200 (psychological level) and 0.7235 (Jan. 11 high). On the downside, supports align at 0.7130 (20-DMA), 0.7085 (Dec. 19 low) and 0.7035 (Dec. 21 low).

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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