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  • From a five-week low, the AUD/USD extended its Friday’s recovery.
  • Retail Sales and Industrial Production in China both exceeded market expectations earlier this month.
  • Despite stimulus hopes and fading inflation fears, market sentiment remains mildly positive.
  • The recent mixed Australian data highlight Tuesday’s RBA as the key event.

The AUD/USD price analysis is bullish as the risk sentiment improves amid upbeat Chinese retail sales data. Further, technical will be the key.

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Following stronger data from China early Monday morning, the AUD/USD price accepts bids to renew intraday highs around 0.7340, up 0.13% in one day. Accordingly, the Australian pair benefits both from better data from the country’s largest buyer, as well as slightly positive market sentiment.

In China, retail sales grew more than 3.5% y/y and 4.4% y/y, while industrial production (IP) grew 3.5% y/y. As a result, the publication reported an increase of 3.1% over a forecast of 3.0%. On the other hand, China’s house price index dropped from 3.8% to 3.4% year over year in October.

A trillion yuan of medium-term loans (MLFs) were disbursed by the People’s Bank of China (PBOC) earlier today. Given China’s role as Australia’s largest buyer, any positive gains in dragon countries could favor AUD/USD prices, as evidenced by recent moves in the pair.

On Friday, the Michigan Consumer Sentiment Index reached a 10-year low, testing the Fed’s rate hike talks. Yellen and FRB Minneapolis President Kashkari followed this example with recent comments. Although US Treasury Secretary Yellen dismissed speculation that incoming stimulus would fuel inflation, Fed Chairman Kashkari insisted the inflation rise was “temporary.”

The yield on 10-year US Treasuries is down 2.6 basis points (bp) to 1.458 percent, while intraday S&P 500 futures gains are just 0.12%.

Recent improvements in risk appetite are helping AUD/USD buyers by combining mixed data from Australia and China’s retention efforts. However, it should be noted that the recent unlocks in Australia may force the Reserve Bank of Australia (RBA) to hold off raising interest rates during Tuesday’s monetary policy meeting, which will, in turn, be the key event for the pair traders.

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AUD/USD price technical analysis: More gains on cards

AUD/USD price analysis

The AUD/USD price comfortably moves above the 20-period SMA on the 4-hour chart. The volume seems encouraging for the buyers. Meanwhile, the average daily range is 35% so far, which indicates slightly higher volatility. The bulls may aim for 0.7370 (50-period SMA) ahead of 0.7390 (200-period SMA). On the flip side, 0.7300 will be the key support to retain the buying momentum.

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