- The Chinese trade balance is due around 2pm Syd/11am local.
- Markets looking for Chinese trade balance to get back on track.
- AUD/USD could react to the data one way or another with keen focus on Fibonacci resistance.
On the docket, for today, we have the Chinese trade balance. While there is no fixed time as per usual, it is expected to be released around 2pm Syd/11am local). Analysts at Westpac note that the consensus is for the trade surplus to bounce to about $46bn, with exports improving to +3%YoY and imports +10%YoY.
The data has taken up more of the market’s interest since the expected slow down in the Chinese economy at the same time the US commenced a blatant trade war, calling the Chinese out as a currency manipulator.
The Chinese economy has been slowing down since the first round of tariffs was imposed by the US in February 2018. In 2020, a slowdown in both the US and China economy is expected as the so-called trade war enters the third year. However, markets are more upbeat as a phase one deal is set to be agreed and signed this week. Investors remain cautious as many see it more like a truce, unable to solve main trade issues. In any case, the Chinse trade data is a good indicator as to how the economy is likely faring up in the trade war and the Aussie can be traded as a proxy.
It is worth noting that China’s trade surplus narrowed to USD 37.93 billion in November 2019 from USD 41.86 billion in the same month a year earlier and below market expectations of USD 46.30 billion, revised data showed. This was the smallest trade surplus since August, as exports unexpectedly declined, while imports surprised forecasts by rising for the first time in seven months.
How might the trade data affect AUD/USD?
AUD/USD has been susceptible to the data and will likely find demand should the balance get back on track with the prior outcomes before November’s disappointment, reassuring markets that China’s measures to stabilise the economy is filtering through.
As for technical analysis, Valeria Bednarik, the Chief Analyst at NDDFX, explained that the AUD/USD pair is just below the 61.8% retracement of its latest bullish tun, unable to clear the Fibonacci resistance.
In the short-term, and according to the 4-hour chart, the pair is neutral-to-bullish, as it’s confined between directionless moving averages while technical indicators eased from intraday highs, holding within positive levels but gaining downward traction. The pair would further lose its upward potential on a break below 0.6885, the immediate support.
About the 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 trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the CNY. As the Chinese economy has 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.