The reaction from Nataxis Asia Pacific Chief Economist Alicia Garcia Herrero to China’s Third Plenum and press conference was overwhelmingly negative. She criticized the lack of change in direction and the absence of any mention of the power of market forces. This disappointment reflects a lack of confidence in China’s ability to shift towards consumption-led growth.
Looking ahead to the upcoming week, the Chicago Fed National Activity Index (CFNAI) will be a key indicator to watch. Economists expect the Index to rise from 0.18 in May to 0.30 in June, which could support hopes of a soft landing for the US economy. The CFNAI assesses economic activity and inflation, factors that could influence investor sentiment ahead of Q2 GDP numbers release on July 25.
The performance of the US economy and key economic reports such as the Services PMI and Personal Income and Outlays Report will play a crucial role in determining the Fed’s rate path. This could have a significant impact on the AUD/USD pair, with a potential for selling pressure if the CFNAI exceeds forecasts. Australian service sector activity and US economic indicators will provide further insight into potential rate hikes by the RBA and rate cuts by the Fed.
The AUD/USD pair is currently hovering above the 50-day and 200-day EMAs, signaling bullish price trends. A break above the $0.67003 resistance level could pave the way for a move towards $0.67500 and beyond. However, a break below key support levels could indicate a downward trend towards the 200-day EMA. With the Daily RSI reading at 47.14, there is a possibility of further downside before reaching oversold territory.
As investors navigate the complex economic landscape of both China and the US, staying informed and adaptable is crucial. Real-time data, news updates, and expert analysis will be key in adjusting trading strategies to manage exposures in the forex markets. The interplay between economic indicators, central bank policies, and market sentiment will shape the outlook for the AUD/USD pair in the coming weeks.
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