AUD/USD shrugs off downbeat China GDP amid risk on mood

• AUD/USD slips from intraday high of 0.7109 despite snapping a two-day downtrend.
• China’s Q3 GDP came out weaker than expected, Retail Sales and IP data flashed upbeat signals for September.
• Markets turn cautiously optimistic on Trump’s comments, upbeat US data.

AUD/USD trims intraday day gains while declining to 0.7098 after China flashed mixed economic releases during early Monday. The reason could also be traced from the upbeat market sentiment and the broad US dollar pullback.

China’s third-quarter (Q3) GDP eased from 5.2% forecast to 4.9% YoY whereas Retail Sales and Industrial Production (IP) rose from 1.8% and 5.8% respective forecast to 3.3% and 6.9% actual releases in September.

Read: China’s GDP expands 4.9% YoY in Q3 vs. +5.2% expected, AUD/USD battles 0.71

Market optimism favor bulls…

Despite mixed signals, AUD/USD remains mostly upbeat, while marking the first positive day since last Wednesday, as traders’ optimism also favor the risk barometer.

Risk tone remains positive after US President Donald Trump said he wants the biggest stimulus than House Speaker Nancy Pelosi’s proposal. With this, Trump turned that table of allegations on Democrats. Earlier, the Republicans were considered market-negative with their lack of readiness to spend more, which in turn have contributed to downbeat polls for US President Trump versus Joe Biden. It should be noted that Democrat Pelosi has given an ultimatum to the White House to complete the COVID-19 relief package negotiations by Tuesday. Hence, hopes of immediate stimulus favor the market optimists to extend late Friday’s recovery in trading sentiment, mainly backed by the US Retail Sales and Michigan Consumer Sentiment Index. Also on the positive side were Trump’s comments suggesting the nearness to the virus vaccine. At home, further easing of coronavirus (COVID-19)-led activity restrictions in the New South Wales (NSW) support the AUD/USD bulls.

However, the global optimism remains challenged as traders doubt the US policymakers’ ability to provide any relief package before the presidential election. Also challenging the bulls are the fears of no-deal Brexit and further worsening of the pandemic in Europe. Additionally, China’s passage of a law to limit controlled exports and Taiwan’s attempt to overcome Chinese companies’ authority also probe the positive mood.

Against this backdrop, S&P 500 Futures rise 0.70% to 3,485 whereas Australia’s ASX 200 gains over 1.0%, currently around 6,245, by the time of the press.

Having witnessed the initial market reaction to China’s key data dump, market players await details of Fed Chair Jerome Powell’s speech, at noon, for immediate direction. Meanwhile, the risk catalysts can keep the driver’s seat with upbeat sentiment likely to favor AUD/USD buyers.

Technical analysis

A successful break above the 100-day SMA level of 0.7100 becomes necessary for the bulls to attack the 0.7205/12 area including 50-day SMA and a falling trend line from September 01. In the absence of which downward sloping RSI, not near to oversold conditions, can direct bears towards a four-month-old support line, at 0.7049 now.