Date: 15 Mar 2019

The Australian and New Zealand Dollar came under heavy selling pressure after official data from the Chinese economy showed the nations industrial output slumping to a seventeen-year low. Industrial production in the world’s second-largest economy expanded a weaker-than-expected 5.3 percent during the first two months of 2019.

Chinese industrial output is now at its weakest level since 2002, highlighting that economic activity in China’s manufacturing, mining and utility sectors continues to soften. The worst than expected data also shows that China’s recent drive to curb debt and the ongoing trade war with the United States are still hurting the broader Chinese economy.

The powerhouse Asian economy also posted worse than expected unemployment data, with the Chinese unemployment rate increasing to 5.3 percent. The nations unemployment rate has risen sharply higher from 4.9 percent in December, with the worse than expected figures also sparking a sell-off in mainland Chinese stocks.

China’s property sales also remained subdued, with property sales growth declining to 2.8 percent during the first two months of the year, which is much weaker than 12.2 percent growth seen during the last month of 2018. Despite the drop in sales growth, property investment actually rose to a five-year high in the first two months of this year, with investment growth of 11.6 percent.

The latest round of weaker than estimated data is expected to prompt more stimulus from the Chinese government, with Beijing recently promising to start fast-tracking road and rail projects, with additional tax cuts also planned. The Chinese central bank has already cut mainland bank’s reserve requirements numerous time over the last year, with the latest cut coming in at the start of this year.

Consumer data from the Chinese economy also showed that spending remained fairly robust during the first month of 2019, with retail sales increasing by a better-than-expected 8.2 percent on a year-on-year comparison basis. Chinese retail sales usually get a boost during January, as consumers ramp-up spending prior to the start of the Lunar new year.

 

AUD/USD Daily Mountain Chart | Source: ActivTrader

AUD/USD Daily Mountain Chart | Source: ActivTrader 

 

The AUD/USD pair is likely to remain pressured while trading below the 0.7130 level; the daily time frame clearly shows the currency pair trapped within a symmetrical triangle pattern. A strong move under the triangle will likely see the AUD/USD pair testing towards the 0.6930 level, while a bullish breakout may encourage technical buying towards the 0.7340 resistance area.

 

Written by Nathan Batchelor, External Analyst

 

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