Drop on China's imports and exports provided strong bearish impact on the Australian dollar as the country remains the most strategic partner for its vast mineral resources, provided to the Asian economy for the industrial sector.
As China's Ministry of Commerce informed on Monday, exports plunged during the month of March 14.6% on an annual basis, after stellar performance during previous month. Moreover, imports disappointed as well, falling 12.3% an the same basis, continuing in a drop seen a month earlier.
Although such drop on exports is expected to be related mostly to the Lunar New Year, further drop in imports seems to be connected more to a slower increase of global demand as we could see last positive reading in October 2014, showing a warning finger for the Australian economy. Declining progress of China's imports are constantly hurting one of the major sectors of the country, while still struggling with recovery and labor market.
Further insight could be provided by labor market data on Thursday this week when the Australian Bureau of Statistics is about to publish mostly monitored employment and unemployment rate change during March.
In addition, US dollar saw a comeback to its previous bullish trend, which could drag Australian dollar further lower, as the Reserve Bank of Australia (RBA) seems to be satisfied with current downtrend of its natinal currency. We will see only two major relevant releases this wee: US retail sales on Tuesday and US Consumer Price Index, released on Friday.
From the fundamental point of view, we still remain bearish, unless correction on the US dollar gets some support, or the RBA will change its policy rhetoric.
From the technical point of view, Australian dollar reached its support at $0.7579 and we expect it to drop even further, to reach $0.7545. If the downtrend continues, we prefer to put TPs for bears to $0.7441.
In case of correction upwards, bulls should put their TP to $0.7664, if the trned continues, we prefer another TP to be set at $0.7719.
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