SYDNEY: The Australian and New Zealand dollars found little support on Tuesday from mixed Chinese GDP data, with their near-term fate dependent on the reaction of the U.S. dollar to the looming inflation report.
The Aussie was flat at $0.6544, having dipped 0.4% overnight to move further away from its eight-month top of $0.6595. Price actions suggest some heavy resistance near the level of 66 cents, with support coming at the 21-day moving average of $0.6530.
The kiwi dollar edged up 0.1% at $0.5978, after slumping 0.6% overnight to as low as $0.5969. It now faces resistance at the 60 cents level and is some distance away from its nine-month peak of $0.6120 hit two weeks ago.
Chinese data showed the gross domestic product grew 5.2% in the second quarter from a year earlier, slightly beating expectations, but gains in retail sales slowed and property prices fell at a sharper pace in June.
“It is just enough to keep the economy growing around the target pace of 5%… and I think from a policy point of view, the authorities will continue to do just enough to keep it ticking over and will not do more,” said Shane Oliver, chief economist at AMP.
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The two Antipodean currencies are often traded as proxies for the Chinese yuan due to Australia’s and New Zealand’s close trade relationship with Beijing. The offshore yuan was steady at 7.1742 per dollar.
Sean Callow, a senior analyst at ITC Markets said the Aussie seems likely to keep failing ahead of 0.6600 for now and may test the 50-day moving average at 0.6489 if the gradual U.S. dollar revival continues.
In the broader foreign exchange market, the U.S. dollar held near three-week highs as traders awaited the release of U.S. inflation data later in the day that could decide or break the case of a September rate cut.
Australian bond yields climbed on Tuesday. Three-year government bond yield rose 2 basis points to 3.482%, the highest since May 23, while ten-year yields ticked up 2 bp to 4.4%, the highest since May 26.
Markets are pricing in an 80% chance that the Reserve Bank of Australia will cut rates in August after the release of the second quarter inflation report. A total easing of 75 bps has been priced in, taking the rate to 3.1% early next year.
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