On May 6th I posted “Technically we now have Daily support and downside Target 1 at 0.7330 – the 50% Fib level, which also coincides with the Weekly retracement levels. Further down we have 200 DMA, support and Target 2 at 0.7260.”
This trade has now achieved both Target 1 and Target 2 within the week following the strong US data on Friday for a net gain of 110 pips. The AUD is heavily influenced by data from China and the weak news over the weekend has pushed the AUDUSD below the 200 DMA and 0.7260 again, only to recover to 0.7290 this morning.
Chinese retail sales and industrial production underperformed in April with annual sales sliding to a 10.1% y/y pace last month, versus 10.5% y/y in March. Slippage was relatively broad-based, with autos tumbling to a 5.1% y/y rate, less than half of the 12.3% y/y from March. Petroleum declined to -3.8% y/y from 0.3% y/y. Industrial production dropped to a 6.0% y/y clip compared to 6.8% y/y thanks to weakness in mining, high energy consumption, and seasonal factors. Renewed signs of slowing in these key indicators could revive the markets’ fears over the economy that dominated at the start of the year, especially as authorities have been aggressively adding to stimulus measures.
Having achieved both T1 and T2 this trade is now closed, however, the pair remains bearish and the Monthly chart shows support at 0.7050 and 0.7000.
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