The Australian dollar reached a local high at 0.6215 against the US currency, but failed to gain a foothold within the 62nd figure. However, the aussie continues to stay above the key 0.6000 mark, despite the overall strengthening of the greenback. It is worth noting that the Australian dollar now reacts mainly to the external fundamental background – internal statistics play a secondary role. Therefore, the further dynamics of the AUD/USD pair will depend on the news flow from China and the behavior of the US currency.
It took two weeks for the aussie to go from an 18-year low of 0.5510 to a local high of 0.6215. A fairly strong 700-point growth was primarily due to the decline in the excitement around the dollar (after the corresponding actions of the Federal Reserve) and positive news from China. Representatives of Beijing at the end of March said that they had coped with the coronavirus and were returning to normal life – including in the industrial sphere. Almost 99% of China's main industrial enterprises have restored their normal production cycle, about 80% of the industry's employees have returned to their jobs, and work has resumed on major investment projects, from airport expansion to gas pipelines. At least, that's what Chinese officials say.
Against this background, the Australian dollar regained its position, since it's economy is largely dependent on China. Therefore, despite the increase in the number of Covid-19 cases both in Australia and around the world, the AUD/USD pair was steadily going up, reaching the 62nd figure on the last day of March. But the further growth of the aussie has stalled – again because of China.
This week, the world community doubted that everything in China is as good as their official representatives say. For example, the Chinese publication Caixin (whose employees conduct their own investigative journalism) reported that the real situation is different from the picture shown in the state media. According to their data, a number of lower-and middle-level officials "strongly recommend" that companies embellish their recovery indicators. Some firms and factories were allegedly told to consume more energy and turn on non-working equipment so that central authorities could not expose the trickery of grassroots officials by comparing data on electricity consumption. In addition, measures aimed at preventing another surge of coronavirus have been introduced at actual operating enterprises. These restrictive measures have added to the inherent difficulties in China's manufacturing sector.
As if in addition to the publication of Caixin, Bloomberg recently published information that official Chinese data on the number of infected and died as a result of the coronavirus pandemic are falsified. According to Bloomberg journalists, this conclusion is contained in a secret report of US intelligence, which was submitted to the White House. However, the journalists' sources did not provide any additional information about this report. But they also clarified that China significantly underestimated the statistics on infected and dead people. At the same time, according to experts, the real picture of the epidemic in China is very important for modeling the spread of Covid-19 worldwide, as well as for evaluating the effectiveness of measures to combat it. That is, if the Bloomberg information is true, then all the forecast constructions that were modeled earlier will be useless.
In the wake of such publications, anti-risk sentiment increased in the market, and the dollar index was able to return above the 100-point mark. The AUD/USD pair retreated to the bottom of the 60th figure. But it should be emphasized here that the bears could not overcome the 0.6000 mark and did not even try to test the 59th figure. The excitement around the dollar decreased during the Asian session on Friday, allowing the AUDUSD bulls to move away from the strategically important price boundary.
By the way, the US currency was lucky yesterday - thanks to the hype around China, the failed statistics from the US remained in the shadows. However, the fact remains that the number of applications for unemployment benefits in the United States increased by six million, with a forecast growth of up to three million. Such dynamics have not been observed in the entire history of observations. Actually, this is why it is difficult for the dollar to develop a full-scale rally, especially against the background of the dollar liquidity provided by the Federal Reserve. In addition, today China has responded quite sharply to the US reproaches about hiding the true consequences of the new coronavirus. Beijing has denied the charges, calling them "a blatant attempt to put political interests above human life." Chinese officials also denied information that appeared yesterday about a new outbreak of coronavirus in the country. According to official data, only 35 new cases were registered in China on the first day of April.
In other words, the hype around China will probably come to naught in the near future, unless some new data is published that indicates that the PRC is hiding the real figures for the epidemic. Otherwise (and this is most likely) today, the market's attention will again switch to macroeconomic indicators, and to be more precise – to US Non-Farms. On the one hand, traders are prepared for the fact that almost all components of today's release will come out in negative territory. But if they turn out to be worse than expected, the dollar could come under pressure across the entire spectrum of the market. Thus, traders of the AUD/USD pair should consider long positions to the nearest resistance level of 0.6101 (the average line of the Bollinger Bands indicator on the daily chart). The next goal of the upward movement corresponds to the local high, that is, the 0.6215 level.
