The US dollar is set to recover some of its earlier losses versus the Australian currency this week, as investor sentiment turned sour from earlier released economic data. Chinese inflation was reported to have quickened more than expected, spurring investor concerns and weakening the Aussie in turn.
After reporting yesterday that imports rose to a record in the world’s second largest economy’s biggest overseas market, Asian shares fell earlier today as a pick-up in Chinese inflation prompted profit taking. Chinese inflation rose 2.5 percent in December, overshooting expectations and dampening the chance for further policy easing as the nation recovers. The Australian dollar pulled back from along the 1.0596 level as technical indicators signaled that gains in the currency could have been too rapid. The Aussie continues to struggle against the 1.0600 resistance and is likely to go into a technical correction.
Back on American soil, the advance figure for seasonally adjusted initial claims for the week ending January 5 was 371,000, an increase of 4,000 from the previous week's revised figure of 367,000. The 4-week moving average was 365,750, an increase of 6,750 from the previous week's revised average of 359,000.
Also, the trade deficit in the US is perceived to have narrowed in November as fuel imports dropped and exports rebounded. According to the median forecast of economists, the trade gap shrank to $41.1 Billion from October’s $42.2 Bllion. Sustained job gains and the drop in oil prices that is helping to reduce the import bill are boosting the buying power of US households, thereby giving the world’s largest economy a lift. Though unlikely to buoy the demand for the Greenback, this could limit the bearish prospects of the Aussie today.
Considering these fundamental data, a short position is advised for the AUDUSD. Again, be cautious of the day’s trades and look out for probable spikes in price activity.
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