Pressure on commodity prices and weaker economic growth is pushing the Australian dollar lower against a strengthening Chinese Yuan. The longer term technical picture is deteriorating. Recent moves have broken the longer term uptrend in AUD/CNH and point to potential for further substantial falls in the currency pair.

Growth in China is stable at higher levels. Recent trade data impressed, although industrial production and retail sales came in slightly below forecasts.  Inflation remains contained, flattening the interest rate curve and highlighting the stable outlook. In contrast wages data in Australia this week disappointed and added pressure to AUD/CNH trading.

Australian commodity exports are an important determinant of AUD levels. Iron ore prices are trading sideways between CNY 420 and 480, but still well down on levels above CNY 600 seen in February and August this year. Copper and crude oil have both reversed recent strength, adding to negative momentum in AUD/CNH.

The weekly chart highlights the possibility of a change in direction for AUD/CNH. A breach of the uptrend means the balance of risks shifts towards further falls. Traders will watch closely for a test of previous support between 4.97 and 5.00.