AUD/USD daily chart
Yesterday, the pair was technically rejected from its June/July 2023 highs near 0.6900, but is expected to bounce back and move higher today following a strong message from the Chinese Communist Party Politburo in support of measures implemented this week to strengthen the Chinese economy.
As a result, Chinese stocks have risen further after the lunch break. The CSI 300 Index was up around 0.7% during the lunch break, but has now surged to 3.0%. The Shanghai Composite Index also rose 2.5% and the Hang Seng Index rose 3.1%.
The CSI 300 index is up 9.4% this week alone, which, if my calculations are correct, is its biggest weekly gain since 2014.
In all of this, the main beneficiary is the Australian Dollar, which is why AUD/USD is rising to recoup some of yesterday's losses.
The simple equation is that what's good for Chinese economic activity and consumption also bodes well for Australia, given our trade dependence and economic relationship with China. And of course what's good for China's economic outlook is typically good for commodity prices, which in turn benefits Australia.
Returning to the chart, the June/July 2023 highs at 0.6892-00 remain a key resistance area to watch for AUD/USD at present, as a break below this is likely to keep buyers subdued for the time being.
On the dollar side, today we have a bunch of Fed comments and US weekly jobless claims numbers, and tomorrow we have the US PCE Price Index to close out the week, but we can't forget about end of month and end of quarter trends either.
