China CPI/PPI overview
Chinese Consumer Price Index (CPI) and Producer Price Index (PPI) figures will be dropping at 01:30 GMT for Tuesday, and the y/y CPI for June is forecast to print at 1.9% (last 1.8%), while June’s y/y PPI is expected at 4.5% (last 4.1%). Traders will be largely focused on the trade balance figures due on Friday, so impact is expected to be muted with markets broadly expecting a slight uptick for both figures, though an extreme deviation in either figure will be giving bulls cause for concern.
How could it affect the AUD/USD?
According to analysts at Nomura, rising commodity prices are expected to be the driving force behind the PPI’s anticipated bump compared to the CPI: “PPI inflation likely ticked higher in June, mainly due to base effects. As crude oil prices fell by 3.7% m-o-m in June (June 2017: -3.9%), their effect on PPI inflation should be slight. We expect CPI inflation to edge up by 0.1pp in June. High-frequency data suggest food price deflation moderated to -0.1% m-o-m in June from -0.2% in May; historical patterns suggest non-food price inflation will likely remain at 0.1% m-o-m in June. “
According to FXStreet’s own Valeria Bednarik, the Aussie is heading into the data already on a bullish stance: “the 4 hours chart for the pair shows that it found some intraday sellers around its 200 SMA, but also that it’s holding above a bullish 20 SMA which advances above the 100 SMA, suggesting that buyers are still strong. In the same chart, technical indicators have barely retreated from overbought readings before losing their downward slopes, also indicating that the upside remains favored.”
Support levels: 0.7445 0.7400 0.7370
Resistance levels: 0.7490 0.7530 0.7565
Key notes:
AUD/USD analysis: bullish case becoming stronger
AUDUSD Analysis: Closes in on the 0.75 mark
About the China CPI:
The Consumer Price Index is released by the National Bureau of Statistics of China. It is a measure of retail price variations within a representative basket of goods and services. The result is a comprehensive summary of the results extracted from the urban consumer price index and rural consumer price index. The purchase power of the CNY is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. A substantial consumer price index increase would indicate that inflation has become a destabilizing factor in the economy, potentially prompting The People’s Bank of China to tighten monetary policy and fiscal policy risk. Generally speaking, a high reading is seen as positive (or bullish) for the CNY, while a low reading is seen as negative (or Bearish) for the CNY.
About the China PPI:
The Producer Price Index released by the National Bureau of Statistics of China is a measurement of the rate of inflation experienced by producers. It captures the average changes in prices received by Chinese domestic producers of commodities in all stages of processing (crude materials, intermediate materials, and finished goods). Changes in the PPI are widely considered as an indicator of commodity inflation. If the Producer Price Index increase is excesive, it would indicate that inflation has become a destabilizing factor in the economy, The People’s Bank of China would tighten monetary policy and fiscal policy risk. Generally speaking, a high reading is seen as positive (or bullish) for the CNY, whereas a low reading is seen as negative (or bearish) for the CNY.
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