Australian dollar falls as oil advances ahead of China trade data

Asia-Pacific markets may fall after inflation worries reappeared on Wall Street, sending US stocks lower. Crude oil prices hit fresh multi-month highs, with WTI rising more than 2% overnight. The breakdown in sentiment weighed on the risk-sensitive AUD while benefiting the US dollar. Treasury yields rose across the curve as traders ditched bonds, anticipating that higher oil prices may firm up inflation bets and, in turn, Fed rate hike bets.

The Aussie dollar may fall further if the dour sentiment persists through today’s trading session. However, economic data out of China may offer a lifeline. China is set to report its May trade balance today. Analysts expect to see the country’s surplus rise to $58 billion from $51.12 billion. A rebound in exports is seen driving much of that strength. A better-than-expected figure may assuage some fears over an economic slowdown.

Chinese technology stocks may offer a bright spot regardless of broader sentiment. Alibaba and other large-cap Chinese technology stocks rose Wednesday after China’s gaming agency approved licenses for dozens of video games, reversing a years-long trend of tightening regulations in the industry. Alibaba’s US-listed ADR closed nearly 15% higher in New York.

Elsewhere, the Philippines is set to report trade data for April. Indonesia and Thailand will report consumer confidence numbers for May. Japan’s May figure for machine tool orders is also due out. The Japanese yen dropped again versus the US dollar, pushing USD/JPY (大口） to its highest level since February 2002. The New Zealand dollar fell victim to the overnight risk-off move, even as New Zealand bond yields hit fresh multi-year highs after the RBNZ announced its plan to reduce its holdings to zero.

AUD/USD technical forecast

AUD/USD prices fell near its monthly low overnight, crossing below the 50-day Simple Moving Average (SMA). The 38.2% Fibonacci retracement, directly below the June low, may provide some support if prices continue to fall. Otherwise, bulls will look to reclaim the 50-day SMA. Meanwhile, the RSI and MACD oscillators are weakening.

AUD/USD daily chart

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