The Australian economy is closely tied to economic indicators from China, given that China accounts for one-third of Australian exports. As investors analyze the implications of the Australian inflation numbers on the RBA rate path, attention is also turning to Chinese industrial profit numbers and their potential influence on buyer appetite for the Aussie dollar.
Economists are forecasting a 4.1% year-on-year increase in Chinese industrial profits for May, following a 4.3% rise in April. However, any weaker-than-expected numbers could paint a gloomier picture of the Chinese manufacturing sector, which has a significant impact on the Australian economy.
With China being a major trading partner, any deterioration in the macroeconomic backdrop could significantly affect demand, the Aussie economy, and the Aussie dollar. Notably, Australia has a trade-to-GDP ratio above 50%, with 20% of its workforce engaged in trade-related jobs, making it particularly sensitive to developments in China.
While attention is focused on Australian and Chinese data, US economic indicators could also sway investor sentiment. In particular, jobless claims data will be closely watched, with economists predicting a slight decrease from 238k to 236k in the week ending June 22. A larger-than-expected drop could reduce bets on a September Fed rate cut, impacting market expectations.
The divergence in monetary policy between the US and Australia is key for investors to monitor. Softer-than-expected US inflation numbers could shift the divergence towards the Aussie dollar, especially after the Aussie Monthly CPI Indicator raised bets on an August RBA rate hike. Conversely, hopes of a September Fed rate hike will depend on upcoming US inflation data.
From a technical perspective, the AUD/USD pair remains comfortably above the 50-day and 200-day EMAs, signaling bullish momentum. A breakout above $0.66500 could trigger a move towards the $0.67003 resistance level, with further upside potential towards $0.67500. However, a break below the 50-day EMA could lead to a decline towards the 200-day EMA and the $0.65760 support level.
The industrial profit numbers from China and US economic indicators will play a crucial role in shaping near-term trends for the AUD/USD pair. Investors need to carefully consider these factors alongside Australian consumer inflation expectations to make informed decisions. The interplay between these various economic indicators will determine the future trajectory of the Australian economy and its currency in the global market.