Bearish Signal

• Sell the AUD/USD and add a take-profit at 0.7620 (last week’s low).

• Add a stop-loss at 0.7700.

• Timeline: 1-2 days.

Bullish Signal

• Set a buy stop at 0.7720 and a take profit at 0.7750.

• Add a stop loss at 0.7650.

The AUD/USD rose in early trading as investors digested the superb Chinese trade numbers and the new US stimulus. It rose to a high of 0.7720 and then erased some of those gains to the current 0.7687 (FXA, UUP).

Strong China Trade Data

The Chinese statistics agency reported surprising trade numbers for February. The data revealed that the country’s exports increased by 60.6% in February after rising by 18.1% in the previous month. This increase was better than the median estimate of 38.9% and the previous month’s increase of 18.1%.

It happened mostly because of the $900 billion US stimulus that was passed in January. Also, exports increased even as China celebrated the week-long lunar new year.

Meanwhile, imports also increased by 22.2% in February. This was a better increase than the prior’s month’s increase of 6.5% and the median estimate of 15.0%.

In total, this performance led to a stimulus package of more than $105 billion, which was higher than the previous month’s $78 billion. The AUD/USD is often viewed as a proxy for the Chinese economy because of the close relationship between China and Australia.

The AUD/USD is also reacting to the massive $1.9 trillion stimulus passed in the US Senate during the weekend. The bill will now go to the House of Representatives and to Joe Biden’s desk for signing.

This deal is good for the Australian dollar for several reasons. First, it has already led to a sharp increase in commodity prices. The Aussie is often viewed as a proxy for commodities. Second, it will lead to a stronger Chinese economy since the US buys a substantial amount of goods from China.

Looking ahead for this week, the AUD/USD price will react to the Australian new home sales and business confidence data. It will also react mildly to the latest China inflation numbers.

AUD/USD Technical Outlook

The AUD/USD price rose to an intraday high of 0.7723 in early trading and then pared-back some of these gains. On the four-hour chart, the pair has moved below the 25-day and 15-day weighted moving averages. It is also along an important support level since this price was the lowest level on February 26.

The two lines of the MACD are slightly below the neutral level. Therefore, even after forming a hammer pattern a few days ago, the pair may resume the downward trend as bears try to retest last week’s low at 0.7620.