Thursday morning in Asia is likely to be a busy affair for the AUD/USD pair traders as not only Aussie monthly Trade Balance but Chinese trade data are also up for publishing.
The first one will be Australia’s March month trade performance, up for publishing at 01:30 GMT. Forecasts suggest that the headlines Trade Balance figures might have increased from 4,361M to 6,800M, which in turn suggests an improvement in Imports and Exports that previously flashed 10% and 29% growths respectively.
Following the Aussie data, China’s General Administration of Customs is set to release the April month Trade Balance report sometime during mid-Asia, Westpac expect it to be out at 01:45 GMT. Even if the dragon nation seems to have recovered from the coronavirus (COVID-19) woes by April market expectations are likely to dash the hopes. As per market consensus, Trade Balance figures could weaken from the prior of $19.93B (revised) $6.35B. Further, the YoY Exports are likely to dip below -6.6% previous mark to -15.7% whereas Imports may also magnify the previous -1% (revised) fall with -11.2% slump.
In addition to being the key data, the numbers have recently gained more importance after fresh fears of the US-China trade war.
While identifying the importance of the event, Westpac said:
At 11:30 am Syd/9:30 am we see Australia’s March international trade data. Westpac is looking for the surplus to widen to $6.8bn, led by a sharp rebound in exports. The April AiG Performance of Services Index is also due, following a substantial fall of 8.3 points in March. Hospitality, the arts and retail have been hit particularly hard by the virus. The China April Caixin/Markit composite PMI and services PMI (market f/c 50.1) are due at 11:45 am Syd/9:45 am local. The official PMIs have indicated that conditions held up over the month. The April trade balance (no fixed time but later than the PMIs) is expected to narrow to $8.68bn as the export side contracts. Finally, April foreign reserves are expected to remain broadly stable at $3056bn after a surprise drop in March.
On the other hand, TD Securities mentioned:
As indicated by the weakness in the trade components of the Apr PMI both exports and imports are likely to drop. An indication of the magnitude can be derived from Korea’s trade data, which revealed that China exports to Korea increased for a second consecutive month even as imports from Korea deteriorated further. We expect imports to fall by 8.9% y/y and exports to drop by 5.7% y/y. Going forward we expect Chinese exports to fall more sharply as demand collapses from the US and Europe, with the bulk of the damage expected over Q2. Markets are looking for Australia’s international trade surplus to rise to A$6000mn in March. Preliminary ABS trade data shows that both exports and imports of goods surged in March, with a greater increase in exports.
Trade numbers amid the trade war will be the key…
Given US President’s latest rhetoric against China’s performance on the trade deal, today’s numbers will be the key to back the claims. Investors will be particularly interested in China’s trade surplus and import figures. Additionally, Aussie trade data can also portray the economy’s strength heading into the crisis. Hence, any upbeat Trade Balance figures may offer immediate upside to the AUD/USD pair but could escalate the US-China tussle and may weigh on the quote afterward.
Technically, a confluence of 21 and 50-day EMA around 0.6375 restricts the pair’s further downside, a break of which can drag the quote to April 21 low near 0.6255. On the contrary, 100-ay EMA near 0.6480 and April month top close to 0.6570 could cap the pair’s near-term upside.
Key Notes
AUD/USD dropped below 0.64 handle on tradewar escalatory headlines
AUD/USD Forecast: Still holding above 0.6400
About China’s Trade Balance
The Trade Balance released by the General Administration of Customs of the People’s Republic of China is a balance between exports and imports of total goods and services. A positive value shows a trade surplus, while a negative value shows a trade deficit. It is an event that generates some volatility for the CNY. As the Chinese economy has an influence on the global economy, this economic indicator would have an impact on the Forex market. In general, a high reading is seen as positive (or bullish) CNY, while a low reading is seen as negative (or bearish) for the CNY.
About Australian Trade Balance
The trade balance released by the Australian Bureau of Statistics is the difference in the value of its imports and exports of Australian goods. Export data can give an important reflection of Australian growth, while imports provide an indication of domestic demand. Trade Balance gives an early indication of the net export performance. If a steady demand in exchange for Australian exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the AUD.
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