As much as one can trust the data, there are signs China’s economy is strengthening which has driven risk appetite higher and the aussie to its highest since July. China reported industrial output, retail sales and fixed asset investment this week, all of which rose more than expected. The data gave hope that China has managed at least a soft landing if not stabilization in the economy.
The aussie jumped, as the proxy China play given trading ties, on all the good news and with a 4.5 percent gain against the dollar month to date is now the second best performing of the 36 most actively traded currencies against the U.S. dollar in August. Only the Brazilian real is doing better with a 5 percent gain. But the aussie also went over bought for a second day based on the 14-day relative strength index print of 75.175. The aussie has not been overbought on that basis since mid April. From that point to now, the aussie lost 11.7 percent. Trading volume in the aussie has picked up this week but only the faithful should be jumping in with both feet.