How China Will Sway Currencies

China is releasing a slew of economic data this week, with the potential to move a key currency. The question is how.


Fasten your seatbelts. China is releasing a wave of economic reports this week, including GDP, consumer price inflation, industrial production and retail sales. And currency investors are making plans.

Amelia Bourdeau, director of foreign exchange at Westpac Institutional Bank, thinks more interest rate cuts are in the offing. "I think Chinese officials must be worried," she told CNBC's Melissa Lee, based on their moves on deposit and lending rates.

That's why investors need to be careful, says Andrew Busch, global currency and public policy strategist at BMO Capital Markets. He believes investors are hoping for GDP growth of 7.9 percent, but says, that growth closer to 7.5 percent would "scare people, you'd start to see some big risk off, and the Aussie dollar would get hit on that."

Brian Kelly of Shelter Harbor Capital agrees that the Australian dollar is exposed at the moment, and he wants to sell it. The Australian economy is heavily based on mining, he notes, and any Chinese stimulus "is not very resource heavy" because the Chinese are trying to transition their economy to a more developed stage. On top of that, Kelly says, "Australia has a housing bubble, their economy is slowing, and they're going to have to cut interest rates." So he wants to sell the Australian dollar against the U.S. dollar at 1.0200 with a stop at 1.0330 and a target of 0.9100.

Todd Gordon, co-head of research and trading at Aspen Trading Group, is skeptical. He argues that in technical terms, the Australian dollar is in an uptrend channel, and he expects it to stay until it gets to parity against the U.S. dollar or lower.


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