Two trades to watch: AUD/USD, Oil

Fiona Cincotta
By :  ,  Market Analyst

AUD/USD falls after weaker than forecast Chinese GDP

 

AUDUSD fell in the previous session and is falling again today, after weaker than forecast Chinese economic growth.

The Chinese economy contracted by -2.6% QoQ in Q2, after growth of 1.3% in Q1. Expectations had been for a contraction of -1.5%. The data highlights the impact of China’s zero-COVID policy and strict lockdown restrictions on the economy.

The USD is rising for a sixth straight session after the USD index rose to 109.29 yesterday as hawkish Fed bets rose following hotter than expected PPI inflation. A softer tone from Fed official Waller could limit the downside.

Looking ahead US retail sales are expected to rebound to 0.8% MoM in June up from -0.3% fall in May. Meanwhile, Michigan consumer confidence is expected to tick lower to a record low of 49.9.

Learn more about trading AUD

Where AUD/USD?

 

AUD/USD ran into resistance at the 50 sma on the 4-hour chart at 0.68 and is rebounding lower. The RSI is heading into bearish territory below 50 suggesting that there could be more downside to come.

 Sellers will need to break below 0.6680 the 2022 low to create a lower low, opening the door to 0.66.

On the flip side, the resistance can be seen at0.6785 the 50 sma above 0.68 the July 13 high, before exposing the 100 sma at 0.6830.

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Oil is set for a weekly decline but holds above 200 sma

 

Oil prices have had a volatile week. Oil dropped sharply at the beginning of the week pulled lower by concerns over the demand outlook as recession fears rose.

The prospect of higher interest rates tipping the US economy into recession has seen oil prices fall to a 4-month low this week and fall by over 25% from the June high. Weak Chinese GDP could continue to pull oil prices lower.

However, the paring back of aggressive Fed rate hike bets are limiting the downside today. Technically the selloff is showing some signs that it could be bottoming out.

Baker Hughes rig count numbers are due later.

Learn more about trading oil

Where next for oil prices?

 

Oil prices have been trending lower from the 122 high reached in mid-June. The price has fallen through its multi-month rising trendline and its 50 sma falling to a low of 88.50.

The long lower wick on the candle suggests that there was little acceptance at this lower level, which combined with the close above the 200 sma could suggest that the downtrend is facing exhaustion. Buyers would need to retake the key psychological level of 100 to move towards 103.50 and create a higher high.

Sellers could focus on the RSI in bearish territory, suggesting more downside to come. Sellers would need to break below the 200 sma at 93.30 and 92.20 the horizontal support ahead of 88.50 to extend the downward trend to 85.

oil1507ci

 

 

Related tags: Trade Ideas AUD USD Oil

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