Australian Dollar Buoyed by Sentiment as China Moves into Focus. Higher AUD/USD?

Australian Dollar, AUD/USD, US Dollar, Iron Ore, China, Japan PPI, USD/JPY – Talking Points

• The Australian Dollar found support while the US Dollar slid lower
• The markets are focussed on the China re-opening story but there might be hurdles
• If commodity prices keep going north, will AUD/USD benefit?

The Australian Dollar is higher at the start of the week as optimism grows around the prospect of China boosting global growth as they seek to re-open their economy.

Iron ore, Australia’s top export, eased slightly on Monday but remains well above last October’s low. Base metals in general have surged higher in hopes of increasing demand from the Middle Kingdom.

While the re-opening of China has been welcomed by markets, the somewhat opaque Covid-19 data is clouding the outlook. The impact has could lead to caution by some investors.

China’s GDP data tomorrow will be closely watched for clues on the state of the world’s second-largest economy.

Japanese year-on-year PPI to the end of December came in at 10.2%, above forecasts of 9.5% and 9.7% previously. The month-on-month figure for December was 0.5%, above 0.3% anticipated and 0.8% prior.

The data revealed upward revisions. USD/JPY continue to languish near the seven-month low under 127.50. The Bank of Japan’s (BoJ) monetary policy meeting on Wednesday could see further tightening.

APAC equities mostly reflected the positive sentiment with all the main indices in the green except for Japan, with the potential upcoming move by the BoJ weighing on it.

Crude oil is slightly softer today but has largely held last week’s gains. The WTI futures contract is above US$ 79.50 bbl while the Brent contract is near US$ 85 bbl at the time of going to print. Gold joined base metals higher trading at a nine-month high of US$ 1,927 today.

The US will be out today as they mark Martin Luther King Jr. Day

The full economic calendar can be viewed here.

AUD/USD TECHNICAL ANALYSIS

AUD/USD remains within an ascending trend channel and is teetering on the upper band of the 21-day simple moving average (SMA) based Bollinger Band.

Resistance might be at the previous highs and breakpoints of 0.7047, 0.7069 and 0.7137. On the downside, support could be at the prior lows and breakpoints of 0.6956, 0.6916 and 0.6860.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

Please contact Daniel via @DanMcCathyFX on Twitter