• China Q4 2021 GDP, Industrial Production showed a rise against the previous reading and the market consesus But the Retail sector had a fall in the December month.
• Expectation of rate cut and the drop of China’s birth rate creates a long term concern for China which in turn impacts Aussie.
• Fed Rate Concerns and the Virus woes leads to the sour market sentiment.

Aussie trades low against the greenback during Monday Asian Session amidst release of Mixed China GDP data and sour market sentiment.

China’s fourth-quarter (Q4) GDP showed reading of 1.6 QoQ by rising against past 0.2% prior and 1.1% forecast And the YoY showed a reading of 4.0% versus 3.6% expected and 4.9% previous readouts. Elsewhere, the Industrial Production (IP) for December also rose to 4.3% more than 3.6% market consensus and 3.8% prior.

On the contrary, Retail Sales had a drop and fell to 1.7% in December which is below 3.7% market forecasts and 3.9% previous reading. Thus it shows the retail sector was badly hit by the coronavirus restrictions.

Beijing responded with a surprise easing in monetary policy which could help support activity in what is Australia’s single biggest export market. Analysts expect more policy rate cuts in the months to come.

As a long term concern for the Chinese’s economy, mainland China’s birth rate dropped to a record low of 7.52 per 1,000 people in 2021, NBS data also showed on Monday while extending a downward trend that led Beijing last year to begin allowing couples to have up to three children.

Investors are betting that the sharp hawkish shift by the Federal Reserve will put pressure on the Reserve Bank of Australia (RBA) to follow and tighten well before its proffered window of 2023.A first hike to 0.25% is priced in by June, with a better than 50-50 chance of a move in May, while rates are seen topping 1.0% by the end of the year.

“With the Fed’s December meeting just over a week away and a likely hawkish outcome, it’s hard to see the US$ giving too much more ground,” said Richard Franulovich, Westpac’s head of FX strategy.

Federal Reserve Bank of San Francisco President Mary Daly said that the latest Omicron wave will extend the period that inflation will remain high. Fed’s Daly also said that officials are “going to have to adjust policy”. Additionally, Federal Reserve Bank of New York President John Williams said “Fed is approaching a decision to begin raising interest rates.” This comments makes concerns around the Fed’s rate hike stronger.

Talking about the virus woes,  Australia’s most populous state New South Wales (NSW) reported the biggest daily covid-linked deaths on Friday with 29 deaths, which recently eased to 17 cases. Then too, Australian health authorities are confident NSW will see a plateau in its COVID-19 hospitalizations next week, as the state’s numbers track “better than the best-case scenario” predicted.

AUD/USD 4 Hour Chart:

Support: 0.7170 (S1), 0.7136 (S2), 0.7075 (S3).

Resistance: 0.7265 (R1), 0.7326 (R2), 0.7360 (R3).

The Mixed Chinese data along with the sour market sentiment drags the Aussie against the US dollar and we expect a bearish trend for AUD/USD.