The pair suffered a technical rejection from the June and July 2023 highs near 0.6900 yesterday. But it is seen bouncing back today, gaining further after the Politburo sounded a strong message to support the measures undertaken this week to bolster the Chinese economy.
Chinese equities are rallying further as a result after the lunch break. The CSI 300 index was up around 0.7% on the day during the break. But it has now jumped up to being 3.0% higher. The Shanghai Composite index is also up 2.5% and the Hang Seng seen up 3.1% on the day.
For the CSI 300 index, it is now marked up by 9.4% on the week itself. And if my calculations are correct, that will be the biggest weekly gain since 2014.
The aussie is a main beneficiary in all of this. And that is seeing AUD/USD push higher to recover some of the losses from yesterday.
The simple equation is that what's good for Chinese economic activity and consumption will bode well for Australia given their trade reliance and economic ties with China. And what is naturally good for the Chinese economic outlook is typically good for commodity prices as well, in turn benefiting the aussie too.
Going back to the charts, the June and July 2023 highs at 0.6892-00 is still the key resistance region to watch as this point for AUD/USD. Keep below that and buyers will stay contained for the time being.
On the dollar side of the equation, we'll have plenty of Fedspeak and the US weekly jobless claims today. Then, tomorrow we'll have the US PCE price index to wrap up the week. But do keep in mind month-end and quarter-end flows as well.
