Bulls keep reins around 0.7350 on upbeat China data

AUD/USD stretches Friday’s recovery moves from a five-week low.
China Retail Sales, Industrial Production both crossed market forecast, prior during October.
Market sentiment remains mildly bid amid stimulus hopes, receding inflation fears.
Recently mixed Aussie data highlight Tuesday’s RBA as the key event.

AUD/USD takes the bids to refresh intraday top near 0.7345, up 0.12% on a day, following the firmer China data during early Monday. In doing so, the Aussie pair not only cheers firmer data from Australia’s largest customer but also benefits from mildly positive market sentiment.

China Retail Sales rose past 3.5% market forecast and 4.4% prior to 4.9% YoY whereas Industrial Production (IP) jumped to 3.5% versus 3.0% expected and 3.1% prior release. Alternatively, China’s House Price Index for October eased from 3.8% to 3.4% YoY.

Read: China’s Retail Sales unexpectedly rise 4.9% YoY vs. 3.5% expected, AUD/USD tests highs

Earlier in the day, the People’s Bank of China (PBOC) injected CNY1 trillion via one-year medium-term lending (MLF). As China is the largest customer of Australia, any positive from the dragon nation favors AUD/USD prices, which in turn could be witnessed by the pair’s latest moves.

Elsewhere, a 10-year low of the US Michigan Consumer Sentiment Index tested Fed rate hike talks on Friday. On the same line were the recent comments from US Treasury Secretary Janet Yellen and Federal Reserve Bank of Minneapolis President Neel Kashkari. While US Treasury Secretary Yellen defied chatters that the incoming stimulus will fuel more inflation, Fed’s Kashkari reiterate that the inflation run-up is ‘transitory’.

Against this backdrop, the US 10-year Treasury yields remain depressed around 1.558%, down 2.6 basis points (bps) whereas the S&P 500 Futures print 0.12% intraday gains at the latest.

Moving on, the recently improved risk appetite joins mixed data from Australia and China’s efforts to stay firmer to help the AUD/USD buyers. It should, however, be noted that the recent unlocks in Australia can push the Reserve Bank of Australia (RBA) to keep rate hike on the table during Tuesday’s monetary policy meeting, which in turn becomes the key for the pair traders to watch.

Technical analysis

AUD/USD keeps Friday’s bounce off the 61.8% Fibonacci retracement (Fibo.) of August-October uptrend amid an uptick in RSI, suggesting further advances. However, the MACD signals remain favorable to the bears and hence highlight the two-week-old descending trend line, around 0.7355, followed by the 100-DMA level of 0.7367, as crucial upside barriers. On the flip side, AUD/USD sellers will wait for a clear downside break of the stated Fibo. level near 0.7275 for fresh entries while the 0.7300 threshold may entertain short-term bears.