Looking for a chance to trade the news this week? Here are some reasons why you should keep a close eye on the Australian dollar:
China’s trade balance and inflation data are weak.
Not everyone can trade the yuan so you might want to consider the next best thing, which is the Aussie. Remember that Australia and the China are very tight trade buddies as majority of Australia’s mining products are exported to Chinese manufacturing companies. In fact, trade activity between the two nations is valued at more than 100 billion AUD annually for the past few years!
With that, the economic performance of China directly affects the demand for Australia’s exports. However, soft Chinese inflation data released earlier this week confirmed that the Asian giant is currently experiencing subdued growth. It also reveals that the People’s Bank of China could hold off from any tightening moves and might even have room to loosen monetary policy.
Meanwhile, the freshly released Chinese trade balance came in significantly weaker than expected for March as the 15.3 billion USD surplus recorded in the previous month turned into a 0.9 billion USD deficit. Components of the report revealed that exports lagged behind forecasts during the month, as analysts predict further deceleration in shipments abroad in the near term.
Australia’s jobs numbers are due in a few hours.
Last Friday, Canada shocked the markets when its unemployment rate jumped from 7.1% to 7.2% and its job losses in March erased all of February’s job gains. This week market players will look at Australia to see if this is an incident seen across the commodity-producing countries.
Australia’s unemployment rate is expected to remain at 5.4%, but analysts are also expecting to see a net decrease of 6,700 workers. This is a huge drop from the unbelievable 71,500 increase in net new jobs that we saw last month.
Be careful in trading this report though! My forex spies have shown me that for the past 15 releases the report has surprised to the downside 5 times and exceeded expectations 10 times. Also note that in 10 of the last 15 releases AUD/USD’s initial reaction to the report was erased during the U.K. and the U.S. sessions.
AUD/USD could test a MAJOR resistance level.
AUD/USD just broke above the 1.0500 major psychological level and it looks like it’s heading towards the 1.0600 area. If you zoom in to the daily chart you’ll see that the pair hasn’t gone above the resistance in 12 months. With plenty of other major events on the docket this week, you might want to pay close attention to the major level!