Every rally must come to an end, or at least undergo a correction. After a very nice performance from the Australian dollar, it turns south to make a correction.
The pair had already topped 0.7480 and looked ready to tackle 0.75, but it lost the 0.7440 support line and is now back to the lower range of 0.7375 to 0.7440, still significantly above the levels seen earlier this year.
The blame can fall on poor Chinese trade figures, but the move down had already begun beforehand, in anticipation of this move.
What did we learn from China?
- Exports collapsed no less than 25.4% in February. While the numbers may be skewed due to the New Year celebrations, the number just shouts.out. Expectations stood on -12.5% and in January the figure was -11.2%.
- Imports dropped by 13.8%, also worse than 10% expected.
- Trade balance in USD terms fell to $32.59 billion from $63 billion beforehand and $50 billion expected.
- Trade balance in CNY terms halved to 210 billion from 406 billion and while 329 billion was on the cards.
All in all, the fall of trade activity in the world’s second largest economy and Australia’s No. 1 trade partner certainly weighs on the Aussie.
Elsewhere, Australia’s NAB consumer confidence actually advanced to 3 points and the central bank is no rush to cut. We had excellent GDP figures from Australia last week. Nevertheless, the Chinese worries offered an opportunity for a correction.
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