Ella 
AUD/USD attracted buying for a second straight day on Friday, rising to a near two-week high during the Asian session. China’s macro data is generally good, and the AUD/USD has climbed further to stand at 0.6400. However, given the fundamental environment, caution is needed before establishing a position for the AUD/USD to rise further.
China’s National Bureau of Statistics (NBS) reported that China’s total retail sales of consumer goods increased at an annual rate of 4.6% in August, compared with expectations of 3.0% and the previous value of 2.5%. In addition, the annual rate of industrial added value above designated size was also better than expected, jumping 4.5% from the previous value of 3.7%. This comes on top of more stimulus measures from China, which continues to support market optimism, weighing on the safe-haven US dollar (USD) and providing some support for the risk-on Australian dollar (AUD).
In fact, the People’s Bank of China (PBoC) cut the reserve requirement ratio for much of the banking system by 25 basis points, the second cut this year. The measure is expected to free up more liquidity and potentially support growth in the world’s second-largest economy. However, the dollar’s apparent losses from Thursday’s more than six-month highs appear to be limited, as the U.S. Federal Reserve (Fed) is increasingly seen as sticking to its hawkish stance. This, in turn, may prevent bulls from placing aggressive bets on AUD/USD.
Market participants appear to believe the Fed will keep interest rates higher for longer and have been pricing in another 25 basis point hike by the end of the year. Strong U.S. macro data released on Thursday, coupled with still-firm inflation, will allow the Federal Reserve to keep interest rates higher for longer. This argument remains supportive of rising U.S. Treasury yields, which would benefit U.S. dollar bulls. Therefore, it would be prudent to wait for strong follow-through buying in AUD/USD before confirming that it has established a near-term bottom.
