AUD/USD, NZD/USD, USD/CNY – Asian Session Daily ForecastLimited movement in the Asian session for Aussie, yuan and NZ dollar. Australian inflation disappoints, U.S. CPI could cause volatility
AUD/USD – Aussie Inches Towards 69-Level
AUD/USD has posted small gains in Thursday’s Asian session. Currently, the pair is trading at 0.6882, up 0.11% on the day. Earlier, the pair touched 0.6888, as the round number of 69 is within striking distance.
Aussie Inflation Expectations falls
Australian fundamentals continue to disappoint. MI Inflation Expectations slipped to 3.1% in August, down from 3.5% a month earlier. This inflation reading is raising concerns – the extent of the decline was unusually sharp, and it marked the weakest gain since May 2015.
Investors Eye U.S. Consumer Inflation
The markets have not had much to analyze in the form of U.S. numbers this week, but consumer data will be in the spotlight for the remainder of the week. On Thursday, the U.S. releases CPI reports, which should be treated as market-movers. CPI is expected to drop to 0.1%, down from 0.3% a month earlier. Core CPI is projected to slow to 0.2%, down from 0.3% in July. Weaker inflation points to slower activity in the U.S. economy which is just what investors don’t want to hear. If inflation levels head lower, risk appetite will sour and I would expect the Aussie to lose ground.
AUD/USD Technical Analysis
AUD/USD is not showing strong movement, but the pair has broken resistance at 0.6865. If we don’t see a retracement, an upward breakout could be next, with no major resistance until 0.6988.
On the downside, 0.6805 has strengthened, with AUD/USD posting gains of 0.50% this week. This is followed by 0.6686, which is a major support level.
USD/CNY – Chinese Bank Loans Beat Estimate
USD/CNY is showing significant movement on Thursday for the first time this week. The pair is currently trading at 7.0861 in the Asian session, down 0.40% on the day
Chinese banks loans rose in August, as banks extended 1.21 trillion yuan ($170 billion) in new credit. This was higher than the July release of 1.20 trillion yuan. The M2 Money Supply, which is correlated to inflation, rose 8.2% in August year-on-year, up slightly from 8.1% in the previous release. An increase in lending points to stronger confidence and spending by businesses and consumers and is bullish for the Chinese yuan.
Ahead – U.S. Consumer Price Index
There are no Chinese events for the remainder of the week, so U.S. data will have a magnified impact on the direction of USD/CNY. Next up are key U.S. inflation reports, with the markets bracing for soft August numbers. CPI is projected to drop to 0.1%, down from 0.3% a month earlier. Core CPI is forecast to slow to 0.2%, also down from 0.3% in July. Weaker inflation points to slower activity, which could hurt the dollar and send USD/CNY to lower levels.
USD/CNY Technical Analysis
The pair has broken through support at 7.1100 on Thursday, but this line remains fluid, and it’s too early to tell if the yuan can consolidate below this level. If it does, I expect further the pair to lose more ground this week. The next support level is at 7.0592, which switched to support after the yuan fell sharply in mid-August, after the devaluation of the Chinese currency.
On the upside, there is resistance at 7.1702, which was an active line last week. It has strengthened in resistance as USD/CNY has moved downwards.
NZD/USD – Hesitant Kiwi at a Standstill
NZD/USD continues to look lackluster, as the pair appears content to trade between 0.6400 – 0.6450. In Thursday’s Asian session, the pair is trading at 0.6438, up 26% on the day. With no major New Zealand events for the remainder of the week, the spotlight shifts to key U.S. economic reports. On Thursday, the U.S. release consumer inflation reports for August. Both CPI and Core CPI are expected to slow in August, after recording 0.3% gains in July. This could sour risk appetite and hurt minor currencies like the NZ dollar.
NZD/USD Technical Analysis
NZD/USD has shown limited movement throughout the week, but that could change if the pair can put sustained pressure on support at 0.6425. If this line breaks, there is room for the pair to push below the 64-level for the first time this week. The next major support line is at 0.6250. On the upside, there is resistance at the round number of 0.6500.