AUD/USD Analysis: Struggling at 0.78 Despite Chinese Industrial Profits Surge

• Industrial profits rose 137% YoY in March, down from 178% YoY in February

• AUD/USD fails once again at 0.7800, as the pair braces for FOMC meetings

• Gold, silver recent outperformance not enough to push AUD/USD to fresh 2-month high

The Australian Dollar struggled to capitalized on Chinese industrial profits surging 137% YoY in March, signaling that the recovery is well underway. China, the only major powerhouse to record economic growth in 2020, continues to experience a robust rebound following the pandemic.

The nation finds itself in a much stronger position economically than its peers, thanks to Beijings early crackdown on coronavirus breakouts in 2020. Last year, the economy expanded about 2.3%. Despite the growth, leaders in China remain adamant that much work remains to rebuild the economy after the fallout of the coronavirus pandemic.

Beijing set a conservative target for economic growth in 2021 at 6%. Surprising many, Beijing defended the decision citing a focus on stabilizing the economy following the “shock” of 2020. The lower GDP target reflects a potential shift in sentiment, in that Beijing may start to focus on quality over quantity when it comes to growth. Against the offshore Chinese Yuan, the US Dollar has weakened 0.25% YTD.

Following the data release, AUD/USD briefly traded near 0.78 before backing off. 0.78 has been a significant level for the pair in recent months, with the last sustained break above 0.78 taking place in late February. Recent gains in the commodity-linked Aussie were likely fueled by bullish domestic sentiment which also translated into strong performance from base metals.

Should the Aussie begin to give back its recent gains against the Greenback, the 50-day moving average sits just below current levels at 0.7722. In recent trade, the pair has used the 50 DMA as support and may do so again. Further below sit the 50D EMA (exponential moving average) and 200 DMA, to provide further support in the event of a serious break lower. With the Federal Reserve meeting this week in the United States, all eyes will be on Chair Jerome Powell for any hints of tapering or a rate hike. Any mention of either could send AUD/USD much lower.

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