The Australian dollar continues to hold above the key mark of 0.7000 that demonstrates a large-scale correctional growth. An important level of resistance was overcome by "Aussie" on Friday amid very contradictory data from China. On the one hand, China's trade surplus in June was $50.9 billion while experts predicted growth to $44.6 billion. The trend is positive - for example, in May, the surplus was 41.6 billion. China's trade surplus with the United States in June increased to 29.9 billion, which is the maximum figure for this year, despite all the efforts of the White House to reduce it. On the other hand, the dynamics of exports and imports have disappointed: these figures have declined, which reflects the negative effects of a trade war.
However, today's macroeconomic data from China unexpectedly turned out to be better than fairly weak forecasts. China's GDP grew by 6.2% in the second quarter of this year. This indicator exceeded the expectations of most analysts by one-tenth of a percent, although, in fact, the indicator remained at the level of the first quarter of the year. In addition, the volume of industrial production in China jumped at an annualized rate immediately by 6.3%. It is worth noting that experts predicted an increase in the rate of only 5.2%. Retail sales in China also turned out to be better than expected. In June, it grew by 9.8% and significantly exceeding the forecast level.
This unexpected result pleasantly surprised traders. After all, panic and anti-risk sentiment reigned in the market more recently, which is associated with a slowdown in global growth. In this context, China played the role of the first violin as previously published indicators of the growth of the Chinese economy plunged traders into depression. Today's numbers have returned traders hope for a global recovery. The trade negotiations between Washington and Beijing, as well as between Washington and Brussels (which have recently resumed) complement the optimistic picture of the day. Of course, the market still takes a cautious position considering previous events. But to the disappointment of dollar bulls, anti-risk sentiments did not return to the market, which would help them turn the tide in many currency pairs, including the AUD/USD pair.
The Australian dollar is also supported by the commodity market. The cost of a ton of iron ore exceeded the 120-dollar value, which has a five-year maximum. Such price dynamics is primarily due to the general reduction in the supply of raw materials. The rise in iron ore prices began at the beginning of the year, after the tragic events in Brazil. Vale, which is the world's largest company in this industry, was forced to reduce production volumes due to dam breaks at the mine. As a result of the disaster, more than 200 people died, after which, the Brazilian authorities initiated an inspection of all the mines of the company (and not just Vale). As a result, many of them were closed due to security concerns.
In addition, the supply of raw materials from Australia significantly decreased this spring. In this case, the weather was to blame (a tropical cyclone and large fires) stopped the work of the country's largest export terminals. An additional (but not unimportant) reason for the iron ore price increase is a record increase in steel production in China. Over the five months of this year, the Chinese increased their smelting by ten percent compared to the same period in 2018. Americans also increased steel production, which is very significant.
As a result, the cost of the raw material that is strategically important for Australia. Iron ore jumped to $120 and updated last week the record from 2014 as it rose to $126. For comparison, the cost of a ton fluctuated in the range of 70-80 dollars at the beginning of this year.
Thus, the AUD/USD pair has the potential for further corrective growth, at least to the first. However, it is advisable to open long positions on the pair after the publication of the minutes of the last meeting of the RBA. The release will take place tomorrow, July 16). In general, the Australian responded with optimism to the results of this meeting, despite the fact that the regulator reduced the interest rate for the second time this year. Although the members of the Central Bank allowed a further easing of monetary policy, traders were skeptical of these intentions. The minutes of the July meeting can either strengthen this skepticism (thereby, maintaining the position of the Australian dollar).
