Asia Session: Chinese GDP data fails to rally AUDUSD above 1.0400
Asia Session
Updated Oct 18, 2012 12:10:32 AM Written by Chris Tedder
Anticipation
of Chinese growth data flat-lined Asia’s commodity currencies early in
the session, with investors nervous about the possible impact of the
data. Hence, the market breathed a sigh of relief when the headline GDP
figure printed exactly in line with expectations of 7.4% y/y. In fact,
in usual fashion for China, the data was leaked around 5 minutes before
the official release. Nonetheless, the data release wasn’t a complete
non-event.
China’s GDP data was almost a non-event
Beijing revised 2012 Q2 growth to 2.0% from 1.8% (q/q) and Q1 growth to 1.5% from 1.6% (q/q) and 2011 Q4 growth to 1.7% from 1.9% (q/q) and Q3 growth to 2.4% from 2.3% (q/q). Whilst the slew of growth revisions cancels each other out, industrial production for September beat economists’ expectations at 9.2%y/y (exp. 9.0%). Furthermore, retail sales for September also printed higher than the market was expecting at 14.2% y/y (exp. 13.2%). But the market wasn’t taken by this data, which is not surprising given how much emphasis was put on today’s GDP data by investors. Thus, there was a small pop higher in the aussie, and by small I mean around 15 pips, before price action calmed down once again.
Overall, China is expanding at a pace the market deems acceptable, which is important for investor sentiment and, in turn, commodity currencies. If the market subscribed to the belief that the Chinese economy was heading for a hard landing, then we would expect to see a significant push away from commodity exposed risk assets, like the Australian dollar.
Can China turn it around in Q4?
Q4 may prove to be a critical period for Chinese growth. If the Chinese economy fails to grow at a faster pace than during Q3, investor sentiment may start to turn. Estimates for 2012 GDP growth in China vary significantly, but anything below 7.7% (where growth currently sits) would likely prove to be a disappointment. The fact that inflation is predicted to rise this quarter, which indirectly controls the amount and severity of any easing measure from Beijing, means that the Chinese economy may continue to struggle from weak levels of domestic demand. Coupled with the fact that global demand is predicted to be very weak this quarter, there isn’t much light on the horizon in Q4 for the Chinese economy.
Elsewhere, business confidence in Australia during Q3 rose from a revised -3 to -2 according to NAB. However, as mentioned earlier, the aussie only really had eyes for Chinese GDP data, thus it ignored the confidence figures.
The Aussie
AUDUSD tested a resistance level around 1.0400, but failed to break through due to the as-expected GDP data. Looking ahead, a push through this level may pave the way for a push back towards 1.0500. Now that the Chinese data is out of the way, the near-term direction of the aussie, and many other risk assets for that matter, may be determined by the success or failure of the upcoming EU summit.
In other news, traders are looking to ASIC to investigate the possible manipulation of prices of numerous stocks on the ASX200 at the open.
Ones to watch: EURAUD
This pair is currently finding some support around 1.2600, which also happens to be around the level which may cause the pair to break its current upward trend on a daily chart. If we see a confirmed break here then the next support level for the pair lies around 1.2505, then 1.2405 (200day SMA). Of course, we need to watch both currencies against USD as they are testing some critical areas, breaks of which may drive price action in the cross pair.
EURAUD – daily
China’s GDP data was almost a non-event
Beijing revised 2012 Q2 growth to 2.0% from 1.8% (q/q) and Q1 growth to 1.5% from 1.6% (q/q) and 2011 Q4 growth to 1.7% from 1.9% (q/q) and Q3 growth to 2.4% from 2.3% (q/q). Whilst the slew of growth revisions cancels each other out, industrial production for September beat economists’ expectations at 9.2%y/y (exp. 9.0%). Furthermore, retail sales for September also printed higher than the market was expecting at 14.2% y/y (exp. 13.2%). But the market wasn’t taken by this data, which is not surprising given how much emphasis was put on today’s GDP data by investors. Thus, there was a small pop higher in the aussie, and by small I mean around 15 pips, before price action calmed down once again.
Overall, China is expanding at a pace the market deems acceptable, which is important for investor sentiment and, in turn, commodity currencies. If the market subscribed to the belief that the Chinese economy was heading for a hard landing, then we would expect to see a significant push away from commodity exposed risk assets, like the Australian dollar.
Can China turn it around in Q4?
Q4 may prove to be a critical period for Chinese growth. If the Chinese economy fails to grow at a faster pace than during Q3, investor sentiment may start to turn. Estimates for 2012 GDP growth in China vary significantly, but anything below 7.7% (where growth currently sits) would likely prove to be a disappointment. The fact that inflation is predicted to rise this quarter, which indirectly controls the amount and severity of any easing measure from Beijing, means that the Chinese economy may continue to struggle from weak levels of domestic demand. Coupled with the fact that global demand is predicted to be very weak this quarter, there isn’t much light on the horizon in Q4 for the Chinese economy.
Elsewhere, business confidence in Australia during Q3 rose from a revised -3 to -2 according to NAB. However, as mentioned earlier, the aussie only really had eyes for Chinese GDP data, thus it ignored the confidence figures.
The Aussie
AUDUSD tested a resistance level around 1.0400, but failed to break through due to the as-expected GDP data. Looking ahead, a push through this level may pave the way for a push back towards 1.0500. Now that the Chinese data is out of the way, the near-term direction of the aussie, and many other risk assets for that matter, may be determined by the success or failure of the upcoming EU summit.
In other news, traders are looking to ASIC to investigate the possible manipulation of prices of numerous stocks on the ASX200 at the open.
Ones to watch: EURAUD
This pair is currently finding some support around 1.2600, which also happens to be around the level which may cause the pair to break its current upward trend on a daily chart. If we see a confirmed break here then the next support level for the pair lies around 1.2505, then 1.2405 (200day SMA). Of course, we need to watch both currencies against USD as they are testing some critical areas, breaks of which may drive price action in the cross pair.
EURAUD – daily
Source: FOREX.com
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