AUD/USD retreats as S&P upgrades Australia growth forecast

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his wife, son,… read more.
on Jun 7, 2021
  • The AUD/USD pair retreated slightly after the latest China trade numbers.
  • The pair also reacted to the economic forecast by S&P Global.
  • The ratings agency boosted the country’s outlook to stable.

The AUD/USD tilted lower after the latest Australian services PMI and China trade numbers. The pair also reacted to the latest jobs data from the United States and the ANZ job advertisement data. It is trading at 0.7736, which was slightly below the Friday high of 0.7750.

AUD/USD
AUD/USD chart

S&P lifts Australia rating

The John Morison government received a boost earlier on Monday after S&P Global lifted the country’s credit rating. It moved it from the negative watch to stable, thanks to the swift actions the government took to slow the pandemic. 

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The agency expects that the fiscal deficit will narrow towards 3% of GDP in the next few years after it jumped to 10% in 2021. The report said:

”The government’s policy response and strong economic rebound have reduced downside risks to our economic and fiscal outlook for Australia. As a result, we are revising the outlook to stable and affirming our AAA/A-1+ long- and short-term local and foreign currency ratings.”

The AUD/USD also reacted to the relatively weak Chinese trade data. The ministry of finance showed that the country’s exports rose by 27.9% year-on-year in May this year. This was a slightly slowdown from the previous 32.3%. But it was worse than the median estimate of 32.1%.

At the same time, Chinese imports rose at a slower pace than expected. The imports rose by 51.1% in May from the previous 43.1%. Analysts were expecting the imports to rise by 51.5%. As a result, the total trade surplus increased from $42.86 billion to $45.53 billion. These numbers are important because China is Australia’s biggest trading partner.

The AUD/USD is also moving because of the strong services PMI numbers and the latest US non-farm payroll data. The services index by AIG rose from 61.0 in April to 61.2 in May. Data by the Bureau of Labour Statistics showed that the US economy added more than 559k jobs in May, lower than the expected 900k.

AUD/USD technical analysis

AUD/USD
AUD/USD technical chart

The four-hour chart shows that the AUD/USD pair declined slightly to 0.7735. The pair has formed a large head and shoulders pattern and is still slightly above the 25-day and 15-day moving averages (MA). The price has also dropped below the lower line of the descending channel. Therefore, there is a possibility that the pair will keep dropping as traders target the next key support at 0.7720.

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