Posted on January 10, 2018 at 4:07 pm GMTAndreas Georgiou, XM Investment Research Desk
Chinese trade data for the month of December are scheduled for release on Friday at 0445 GMT. Analysts forecast exports and imports to grow solidly, though at a softer pace relative to November, a month during which both figures stormed past expectations to expand by double digits on a yearly basis.
Exports and imports are forecast to grow by 9.1% and 13.0% y/y respectively, down from 12.3% and 17.7% in November, while the trade surplus is anticipated to narrow to 37.0 billion US dollars from around 40.2bn in the previous month.
Strong global demand acted as a catalyst for the sharper increase in outbound shipments since March during November, with expectations for synchronized global growth in 2018 bolstering the outlook for Chinese exports moving forward. It should be acknowledged though that however strong demand from overseas markets might prove to be, it is not realistic to assume continuous double-digit growth in exports. Also, although the risk of an outright trade war between the US and China seems to have largely abated, actions by the Trump administration serving as a drag on Chinese exports are not to be completely ruled out, with an anti-dumping probe on Chinese steel imports already being instigated by the US.
The rebalancing of the Chinese economy from a model of export-driven growth to one of domestically-driven consumption is well underway and is in part reflected in robust inbound shipments to the world’s second largest economy. Rising consumption is likely to continue supporting imports, however, government efforts to curb risks in the financial system in the form of excessive credit could pose downside risks on imports moving forward.
The Australian currency is considered a liquid proxy for China’s economy given the two nations’ strong economic ties – China is Australia’s largest export (and import) partner. Therefore, besides yuan movements, the aussie will also be eyed as Chinese trade figures go public; last month’s trade report out of China even had reverberations for Australian equities, with metals & mining firms receiving a boost on the back of the upbeat data.
Stronger-than-anticipated figures could lead to long aussie/dollar positions by forex market participants. In this case, the pair might meet resistance around 0.7885, this being the 61.8% Fibonacci retracement level of the September 8 to December 8 downleg, with the range around it also encapsulating last Friday’s near three-month high of 0.7874.
On the contrary, a downward deviation from expectations, could push aussie/dollar lower. In this scenario, the area around the 50% Fibonacci mark of the aforementioned downleg at 0.7811 could provide some support.
Lastly, it should be mentioned that Australia will see the release of important data on retail sales on Thursday at 0030 GMT. Those also have the capacity to spur movements in aussie pairs.AUDUSDUSDCNH