When is the China CPI/PPI release, and how could it affect the AUD/USD?
China CPI/PPI overview
Early Thursday at 01:30 GMT sees China's latest Consumer Price Index and Producer Price Index figures for December, and the annualized CPI reading expected to tick downwards to 2.1% from 2.2%, and December's annualized PPI is expected to decline noticeably to 1.6% from 2.7%, while the month-over-month CPI is forecast to tick up from -0.3% to 0.3% for the same month. Trade tensions between the US and China are dragging growth prospects lower, not just for China for the rest of the world as tariff spats see knock-on effects reverberating through the entire Pacific-Asian region, and continued slowdown for Chinese growth figures will bode poorly for overall market sentiment, threatening the Aussie.
How could it affect the AUD/USD?
Although bearish warning signs continue to hang over the Aussie-Dollar pairing, the pair is still leaning bullish in the near-term on the back of an unexpectedly dovish showing from the FOMC and key Federal Reserve heads on Wednesday, but a fresh round of disappointing China data could stall out the AUD once again, and as FXStreet's own Valeria Bednarik noted:
The 4 hours chart shows that the price is currently battling with a mildly bearish 200 SMA, while above the shorter ones and with the 20 SMA accelerating north above the 100 SMA. The Momentum indicator is trying to advance but for the most stuck to neutral levels, while the RSI hovers near overbought readings, leaning the scale to the upside. As long as above 0.7155, the pair has room to extend its gains up to the long-term static resistance at around 0.7250.
Support levels: 0.7155 0.7115 0.7080
Resistance levels: 0.7210 0.7250 0.7300
AUD/USD analysis: painfully bullish, Chinese data in the way
About China CPI
The Consumer Price Index is released by the National Bureau of Statistics of China. It is a measure of retail price variations within a representative basket of goods and services. The result is a comprehensive summary of the results extracted from the urban consumer price index and rural consumer price index. The purchase power of the CNY is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. A substantial consumer price index increase would indicate that inflation has become a destabilizing factor in the economy, potentially prompting The People’s Bank of China to tighten monetary policy and fiscal policy risk. Generally speaking, a high reading is seen as positive (or bullish) for the CNY, while a low reading is seen as negative (or Bearish) for the CNY.
About China PPI
The Producer Price Index released by the National Bureau of Statistics of China is a measurement of the rate of inflation experienced by producers. It captures the average changes in prices received by Chinese domestic producers of commodities in all stages of processing (crude materials, intermediate materials, and finished goods). Changes in the PPI are widely considered as an indicator of commodity inflation. If the Producer Price Index increase is excesive, it would indicate that inflation has become a destabilizing factor in the economy, The People’s Bank of China would tighten monetary policy and fiscal policy risk. Generally speaking, a high reading is seen as positive (or bullish) for the CNY, whereas a low reading is seen as negative (or bearish) for the CNY.