The Asian markets were mixed overnight with the Hang Seng dropping whereas the Shanghai Stock Exchange was higher after China reported a slower annual rate of growth to 4.0% in Q4 from 4.9% in Q3, caused by Covid outbreaks and a slowdown in the property market. In 2021, China's economy grew 8.1%, which by Western standards is good, but not anywhere near the pace China had been growing.
China’s zero-covid policy is likely to keep weighing on the economy, especially considering the upcoming Winter Olympics as we saw in Japan as they held the summer Olympics. Furthermore, it may negatively impact an already stretched global supply chain, which has contributed to inflationary pressures around the world and is likely to keep doing so.
China's central bank lowered interest rates for the first time in nearly two years to support the Chinese economy, in what may be seen as a "do as I say, not as I do" move. Chinese President Xi Jinping told the World Economic Forum earlier today, that sudden changes in monetary policy are likely to exacerbate the negative impact of the Coronavirus pandemic. Xi warned that inflation risks are increasing, pointing out that multiple factors, such as supply chain disruptions and the state of the energy markets, are contributing to the trend synergistically.
The London session has started off with the yuan gaining relative strength across most currencies, though the weaker US dollar and better than expected Chinese GDP, despite being lower than before, gave the commodity pairs, and especially the AUDUSD an early boost. There are also expectations growing for the RBA to follow the Federal Reserve and end its Quantitative Easing policy thus tightening monetary policy, which in turn supports the Australian dollar. This could happen by the end of February or the beginning of March so the AUD could re-price accordingly until then.
For some reason, the retail traders on the ActivTrader platform continue to be heavily invested in the demise of the Australian dollar versus the Japanese yen. The AUDJPY is a great indicator for risk-on trades as the yen is a go-to for currency traders looking for a safe haven and the Aussie is one of the main higher-yielding, trending currencies, that appreciate when there is global economic growth. The RBA and BOJ monetary policies are also diverging, so there should be a higher AUD versus the JPY.
The daily 200-period EMA acted as solid dynamic support when tested last week, and this looks to have completed an ABC correction from the significant-high printed on 5th January 2022. If this correction is now complete and we look for the bull move continuation pattern, the upside targets will be 84.30, 86.19 and 88.72.
If the price action were to continue going lower along with the retail sentiment, the next levels of support would be 81.05 and 80.25. Anything below there and we’re looking for a test of the significant swing low and a continuation to the downside.
Any good news spin out of China will boost the AUDJPY and assuming the Australian unemployment data out this week isn’t horrendous, the AUDJPY should continue moving higher from here on in.
Commentaires