(MENAFN- DailyFX)
Solid Chinese data and newfound potential for a diplomatic resolution in Syria have sparked relief rallies in AUDUSD and USDJPY, both of which are now hovering close to key resistance levels.
Currency markets were generally quiet in today’s Asian and early-European trading sessions, but AUDUSD and USDJPY outperformed, boosted by stronger-than-expected Chinese economic data and some mild relief that the Syrian conflict may find a diplomatic solution.
The Australian dollar (AUD) gained in late-Asian trade after Chinese data beat consensus estimates. Retail sales rose 13.4% versus 13.3% expected, industrial production increased 10.4% versus 9.9% forecast, and fixed-asset investment expanded by 20.3% versus 20.2% anticipated.
Overall, the data from China showed that the country's economy continues to expand at a healthy pace despite widespread concerns that it would slow markedly in the second half of this year. The news bodes well for global growth in general, and for Australia, in particular, as it suggests that Chinese demand for Australian resources is likely to remain high for the foreseeable future.
AUDUSD climbed to a high of .9288 before encountering some profit taking ahead of the key .9300 level. Over the past several days, the pair has shown relative strength after sentiment towards the unit has changed, and it appears to have now formed a formidable base at the .8900 level. If the pair can clear resistance above .9300, AUDUSD could make a sprint towards .9500 as short covering kicks in, especially if the long-anticipated Chinese slowdown never materializes.
USD/JPY May Find Footing Above 100
USDJPY was also well bid today, popping above the 100.00 level in early-European trade. The easing of Syria-related tensions came after US President Barack Obama signaled that he is open to a diplomatic solution, and that provided the catalyst for the risk-on move.
If the US can indeed avoid a military confrontation in Syria, the downward pressure on USDJPY could ease considerably, and that could push the pair towards the 100.50 level as the day progresses.
Potential for a Risk-on US Session
With no major data on the economic calendar for North America today, the currency markets may once again look to equities for directional cues. If the news from Washington continues to suggest that a diplomatic resolution is possible in Syria, risk-on flows could continue throughout the North American session.
See also: 3 Stories Making Noise in a Quiet Week
By Boris Schlossberg of BK Asset Management
original source
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