- The AUD/USD pair formed a bearish flag pattern as investors react to China GDP data.
- The country's economy expanded by 4.9% year-on-year in the second quarter.
- Retail sales, unemployment rate, and industrial production were strong in September.
The AUD/USD is little changed as investors digest the latest upbeat economic Chinese economic data. The pair is trading at 0.7090, which is slightly higher than Friday’s low of 0.7060.
China recovery gains pace
China, the source of the Covid-19 pandemic, has recovered relatively well. The country, with a population of more than 1.3 billion people, has recorded just 91,436 infections and less than 5,000 deaths. This is a considerably low amount compared with the United States, which has recorded more than 2 million infections and more than 200k deaths.
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The impacts of the Chinese handling of the economy is visible in recent growth data. According to the country’s statistics office, the country’s economy expanded by 4.9% year-on-year and by 2.7% QoQ on the third quarter. The economy had expanded by 3.2% in the second quarter, becoming the first major economy to expand. Still, the quarterly growth was lower than the 5.2% that a survey by Reuters was expecting.
The bureau said that exports grew in the past four straight months as global demand increased. In September, they accelerated by 10%. Fixed asset investments rose by 0.8% while government investment also rose.
Separately, in September, retail sales, which have been relatively weak this year expanded by 3.3% after rising by 0.5% in the previous month. The unemployment rate also declined to 5.4%, which is lower than that of the US and the European Union. Also, the industrial production rose by 6.9%, in line with what analysts were expecting.
Chinese numbers are important for the Australian economy and the AUD/USD price. This is because China is the biggest buyer of Australian goods such as copper, iron ore, and coal. It is also the biggest foreign consumer of Australian services like education and tourism.
Tomorrow, the Australian dollar will react to the minutes by the Reserve Bank of Australia (RBA). These minutes will provide a clear picture of the deliberations that officials made in the past monetary policy meeting. In this meeting, they left rates unchanged and continued with the asset purchases.
AUD/USD technical outlook
The four-hour chart shows that the AUD/USD price has been in a relatively tight range recently. The pair is now in the fourth wave of the Elliot wave pattern. It is also forming a bearish flag pattern that is shown in pink. Also, the price has moved slightly below the 25-day and 15-day exponential moving averages. Therefore. I suspect that the pair will break-out lower eventually as it tries to complete the Elliot wave pattern.