Aussie Dips as China’s Trade Decline Sharply

• China’s imports and exports fell at a much faster pace than expected in July.

• The Australian economy was strong in July.

• The RBA chose not to raise rates at its August policy meeting.

The outlook for AUD/USD today is bearish. The dollar surged Tuesday as traders struggled with differing growth prospects for the world’s top two economies. Of note, new data on Tuesday revealed that China’s imports and exports fell at a much faster pace than expected in July.

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Imports plummeted by 12.4% year-on-year while exports fell by 14.5%, further indicating that the country’s economic recovery is faltering. As a result, the Australian and New Zealand dollars fell.

Meanwhile, the Australian economy was strong in July with above-average sales, profits and employment. But soaring labor costs and prices signaled continued inflationary pressures.

A National Australia Bank survey released on Tuesday showed the company’s business sentiment index fell slightly. But its confidence indicator, known as volatility, has risen.

In a worrying sign of inflation, labor costs posted a massive 3.7% rise on a quarterly basis. This is probably due to mandated minimum wage and bonus wage increases. In addition, soaring electricity prices have increased purchase costs, nearly doubling retail price growth to 2.6% in the quarter.

As a result, there may be problems with future official consumer price measurements, which showed a good decline in inflation in the second quarter. Despite the progress observed in the second quarter consumer price index report, the survey results highlight a substantial upward impact on inflation.

Notably, the Reserve Bank of Australia opted not to raise rates at its August policy meeting last week. The bank relied partly on hopes of lower inflation.

AUD/USD major events today

Investors are not expecting major economic reports from the US or Australia today. Investors will therefore continue to absorb recent releases.

AUD/USD Technical Outlook: Prices turn down after rejecting at 0.6600 and 30-SMA.

On the technical side, AUD/USD has fallen after respecting the 0.6600 level and the 30-SMA resistance. Bias on the 4-hour chart is bearish as price consistently makes lower highs and lower lows. Moreover, it mostly respects the 30-SMA as a resistance and bounces low every time it rises to that level.

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Finally, the RSI is trading below 50, indicating solid bearish momentum. Therefore, if the bears approach the next hurdle of 0.6500, there is a good chance that it will break down to new lows.

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