AUD/USD extends recovery gains to 0.6900 following China’s data dump

• AUD/USD respects better than forecast increase in Industrial Production and Retail Sales.
• The US gaining an upper hand in the latest trade deals helps greenback to cheer the recently upbeat US data.
• Few more of the US data-dossier, Fedspeak and trade/political headlines will be in focus for now.

AUD/USD rises to 0.6900 after China released the latest batch of headline data during early Friday. The pair pulled back from 21-day SMA resistance during the previous day amid broad USD strength.

China’s fourth-quarter (Q4) GDP numbers remained unchanged, while also meeting the forecast, at 6.0% YoY and 1.5% QoQ. However, Retail Sales grew past-7.8% expectations to reprint 8.0% growth whereas Industrial Production crossed 5.9% market consensus and 6.2% prior with a rise to 6.9%.

The pair registered losses the previous day after the US dollar gained across the board on the upbeat activity numbers and retail sales data. The same increased the odds for the US Federal Reserve (Fed) to rethink their ‘on hold’ monetary policy decisions. “We also expect additional policy easing in our key trading partners of China and Australia. Against that backdrop, risk assets are expected to continue to perform well,” said analysts at the Australia and New Zealand Banking Group (ANZ).

It should also be noted that the US trade deals with China, Mexico and Canada give it the authority to ignore the World Trade Organization (WTO) as per the Wall Street Journal (WSJ), and can be considered as providing additional strength to the greenback.

Markets will now concentrate on the US data that include the December month housing market and Industrial Production numbers coupled with the Michigan Consumer Sentiment Index for January. Other than the statistics, few of the Fed policymakers are also lined up for speaking and may move the markets should they emphasize on the recent recovery in headlines economics.

Ahead of the US releases, TD Securities said, “Following a 1.1% m/m rebound, we look for industrial production to retreat again, posting a -0.5% decline for Dec. We expect weakness in utilities, to a larger extent, and manufacturing to drive production lower during the month. We also forecast a small decline in housing starts to 1,360k in Dec (from 1,380k), while we look for UMich's consumer sentiment index to improve to 100.5 for Jan's preliminary release (from 99.3).”

Technical Analysis

AUD/USD prices need to provide a daily closing beyond a 21-day SMA level of 0.6930 to aim for 0.7000, until then risks of revisiting the monthly bottom near 0.6850 can’t be denied.