Risk falters as Chinese data and EU oil ban

AUD/USD => The pair falls away from 0.72
HPE.US => The stock rises above $15
Stoxx50 => The index falls below 3850

AUD/USD falls after Chinese business activity contracts

AUDUSD was the top-performing currency major in the previous session as the Aussie found support from the risk-on market mood and the easing of COVID mobility restrictions in China.

Shanghai is expected to open tomorrow fully. Data released overnight showed that Chinese business activity, both manufacturing and services, contracted again in May due to the lockdowns. While the data showed that the worst of the growth shock had passed, the path to normalization is very slow. The USD traded quietly lower yesterday, a US public holiday.

The greenback has sold off across recent sessions amid optimism that peak inflation has passed, and the Fed could adopt a less aggressively hawkish stance. Today the pair is falling as attention turns to US consumer confidence data ahead of Australian GDP figures for Q1.

China manufacturing PMI

US consumer confidence

Actual: 47.8 (5.9)

Expected: 103.9 (3.4)

Previous: 41.9

Previous: 107.3

Risk falters as Chinese data and EU oil ban

Where next for AUD/USD?

AUD/USD trades in an ascending channel dating back to May 12.

The price has recaptured the 20 sma, which, combined with the bullish RSI, keeps buyers hopeful of further upside. Buyers need to break above 0.72 round number and 0.7250 the 50 sma to extend the bullish run towards 0.7310, the January high. On the flip side, support can be seen at 0.71, the February 24 low, with a break below there exposing the 20 sma at 0.7050 ahead of 0.70 round number.

Hewlett Packard Q2 earnings

HP had seen PC sales soar across the pandemic over the past few years, boosted by work-from-home practices and lifting the share price to a record high in April.

Then it was also revealed that Warren Buffet had picked up a $4,2 billion stake in the business. When HP reports Q2 earnings, the focus will be on whether it can maintain full-year earnings guidance in light of supply chain disruptions caused by COVID lockdown restrictions in China and in light of surging inflation and a potential slowdown in consumer spending, all of which could all threaten the outlook.

Expectations are for a 1.6% YoY increase in revenue to $16.1 billion. This would mark the slowest pace of growth in 18 months as it comes up against tough comparisons from the previous year. Adjusted EPS is expected to rise 13% to $1.05.

EU Stoxx50 falls after oil ban & ahead of inflation data.

EUStoxx50 closed yesterday 0.86% higher, buoyed by strong risk appetite across the financial markets.

Data from the eurozone revealed that economic sentiment in the bloc remained broadly stable in May, according to the latest data from the European Commission.  While the indicator remains well below its pre-Ukraine war level, morale appears to have steadied even as economic growth stalled in Q2 and prices continued to rise.

Today the index is heading lower after the EU finally approved the deal to ban Russian oil, sending oil prices higher and rising inflation fears. Attention will now turn to Eurozone inflation data, which is expected to rise to a record high in May. German unemployment is also expected to tick lower.

Ger. CPI YoY May

EU. Inflation YoY May

Actual: 7.9% (0.5%)

Expected: 7.7% (0.3%)

Previous: 7.4%

Previous: 7.4%


Support can be found at 3795 (50 sma) and 3676 (20 sma).

Resistance for the pair can be seen at 3950 (April 21 high) and 4026 (March 29 high).

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