AUD/USD may rise with iron ore prices as China trade data nears

Monday's Asia-Pacific outlook

Asia-Pacific traders will kick off what is expected to be another volatile week of trading as Russia presses its advance toward Kyiv, Ukraine’s capital city. The embattled Eastern European country is readying for another major offensive after Ukrainian forces managed to hold back Russia’s initial assault, said Ukraine’s national security adviser on Sunday. The list of international companies pulling business from Russia grew over the weekend, with Visa, Netflix and TikTok announcing the suspension of services. The commodity-linked Australian Dollar may continue to glide higher today as iron ore prices climb in Asia, extending gains from last week.

The third round of cease-fire talks will take place today between Ukrainian and Russian diplomats, although an agreement looks unlikely. On Sunday, US Secretary of State Anthony Blinken said that there are credible reports of Russia targeting civilians, possibly constituting war crimes. That follows Ukrainian claims that Russia is shelling civilian evacuation routes that were previously negotiated with Moscow. President Zelensky continues to urge NATO to institute a no-fly zone over Ukraine, but that appears unlikely, with the West instead considering supplying fighter jets to Ukrainian forces.

WTI and Brent crude oil prices will be under close watch this week after surging higher amid growing calls in the US to ban Russian imports. That would likely boost inflation at a time when prices are already at 40-year highs in the United States. A report due later this week is expected to show the US consumer price index (CPI) rose 7.9% year-over-year in February. Oil hasn’t been the only commodity to surge, with prices across grains, metals, and other energy products rising sharply in recent weeks. That has been a boon for the commodity-linked Australian Dollar and its cross-Tasman counterpart, the New Zealand Dollar, even against the haven-boosted US Dollar.

China’s balance of trade data for January and February will cross the wires today at 03:00 GMT. Analysts expect a trade surplus of $99.5 billion. A stronger-than-expected figure could spur some strength in the Yuan despite recent moves by the People’s Bank of China (PBOC) to temper the currency’s strength through daily fixings. USD/CNH rose last week after hitting the lowest levels since April 2018.

Over the weekend, China announced a GDP growth target of around 5.5% for the year at its annual legislative session. While down from its 2021 goal of 6% or more, China hasn’t had much trouble in recent years exceeding economic targets. Still, the country faces rippling global supply chain issues at a time when other major economies will be tightening policy. Beijing intends to provide fiscal and monetary support that should help bolster employment and investment. That should provide a tailwind to the Australian Dollar given the high amount of trade between China and Australia.

Australian dollar technical forecast

AUDUSD looks primed to continue rising into fresh 2022 highs this week after piercing above the high-profile 200-day Simple Moving Average (SMA) on Friday. The Relative Strength Index (RSI) is eyeing a cross into “overbought” conditions, while the MACD oscillator signals increasingly healthy upside momentum. If prices rally further, the October 2021 swing high at 0.7556 would come into view as a possible target. Alternatively, a reversal lower would have bulls attempting to defend the 200-day SMA.

AUD/USD daily chart