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  • AUD/USD’s bounce from session lows stalls as China reports below-forecast data. 
  • China’s Retail Sales contracted more than expected in May. 
  • Industrial Production ticked higher but missed estimates. 

AUD/USD’s recovery from the session low of 0.6807 stalled near 0.6840 after China’s Retail Sales and Industrial Production data missed estimates. 

Consumer spending, as represented by Retail Sales, declined by 2.8% year-on-year in May versus the expected contraction of 2% and following April’s 7.5% decline. Meanwhile, Industrial Production rose by 4.4% in annualized terms, having increased by 3.9% in April, but missed expectations for a 5% growth. 

The weaker-than-expected data validates fears that the economic recovery from the coronavirus-induced recession would be slow. The AUD, therefore, could fall back to session lows during the day ahead. 

Besides, fears of the second wave of the coronavirus seem to have gripped markets since last Thursday and the risk sentiment remains under pressure at press time. With the futures tied to the S&P 500 down over 1% at press time, the odds look stacked in favor of the AUD bears. 

The narrowing of the spread between the Australian and US 10-year government bond yields also favors a weaker AUD. As of writing, the spread is seen at 20 basis points, having declined by 10 basis points in the last two trading days. 

At press time, the pair is trading near 0.6828, representing moderate losses on the day. 

Technical levels

 

Expert score

5

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