AUD/USD: Trading the Chinese Industrial Production

Chinese  Industrial Production  is  a key manufacturing indicator.  Respondents are surveyed for their view of the economy and business conditions in China. A reading which is higher than the market forecast is bullish for the Australian dollar.

Here are all the details, and 5 possible outcomes for AUD/USD.

Published on Wednesday at 5:30 GMT.

Indicator Background

Traders should pay close attention to this key release, as China is Australia’s number one trading partner, and an unexpected reading can quickly affect the direction of AUD/USD.

Chinese Industrial Production has slowed down considerably in the past 12 months, as the indicator was posting gains around the 9% level in the summer of 2014. The March reading slipped to 5.6%, well short of the estimate of 6.9%. The markets are  expecting some improvement in the April report, with an estimate of 6.1%.

Sentiments and levels

The RBA  cut rates as expected to 2.0%,  but the Aussie has held its own despite rates being at record lows.  US numbers have been lukewarm, but the markets are expecting the economy to improve in Q2 after a lackluster Q1. So, the overall sentiment is  neutral on AUD/USD towards this release.

Technical levels, from top to bottom: 0.8150, 0.8077, 0.7978, 0.7799, 0.7692  and 0.7601.

5 Scenarios

1. Within expectations: 5.8% to 6.4%: In such a case, AUD/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations:  6.5% to 6.9%: An unexpected higher reading can send the pair above one resistance line.
3. Well above expectations: Above  6.9%: Given the current downward trend, the likelihood of a sharp expansion is low. Such an outcome would push the pair upwards, and a second resistance line might be broken as a result.
4. Below expectations:  5.3% to 5.7%: A smaller  gain  than forecast could push AUD/USD downwards and break one level of support.
5. Well below expectations: Below 5.3%: A very poor reading  could push the pair below a second support level.

For more on the Australian dollar, see the AUD/USD forecast.

To follow this event live:   [do action=”calendar-event” eventid=”5ac6e9f7-c6b0-44a8-b093-a5a73e80db48″/]