Chinese growth target caution weighs on risk appetite

  • China’s GDP growth target is 5%: This was lower than analyst expectations of 5.5% to 6.0%. 
  • A rebound in risk appetite has been weighed down: In commodities, metals and energy prices are lower.
  • AUD and NZD are underperforming: The negative bias is also reflected in major forex
  • Rebound in equities is looking more cautious today: A strong rally into the close on Friday is less assured on Monday with European indices mixed and US futures only slightly higher.

China’s GDP target underwhelms 

The Chinese Government lays out its plans for economic growth every year (apart from in 2020, the year that COVID hit).

Last year, the target for GDP growth was around 5.5%. The graph below from Reuters shows that actual growth of c. 3.0% was significantly lower than the target.

Last year, the target for GDP growth was around 5.5%

It seems that this year, the Chinese Government is being more cautious with its target.

Chinese Premier Li Keqiang presented the growth plans to Parliament on Sunday. However, the target of 5% was lower than market expectations of around 5.5% to 6%.

The lower growth target also came with the issuance of 3.8 trillion yuan in local bonds (how the government funds its infrastructure investment). According to ING, this was also lower than expected.

This all plays into a more cautious approach of the Chinese government, given the situation for the global economy.

A negative bias to risk appetite

As markets have responded to this news, there has been a negative bias to risk appetite.

This is showing in commodities markets, with the oil price trading lower today. Early weakness in metals prices has unwound.

It is also showing in the underperformance of the AUD. The Aussie is considered a pro-cyclical (therefore higher risk) commodity currency whose performance is closely tied to the outlook for China. 

Oil rally stunted, AUD struggling

There was a sharp rally on oil as risk appetite rebounded firmly on Friday. However, this move has been dragged back this morning. 

There was also a positive move on the AUD into the close on Friday. However, the AUD is the worst-performing major currency today. 

Price reaction in the days ahead will show how important this news from China will be for these markets moving forward.

Brent Crude oil (UKOUSD) 

A huge intraday rally into the close on Friday looked to be an indication of a significant shift to a more positive outlook. However, the early move today is lower and is stunting the rally. 

The market is backing away from the February lower high resistance at $86.90. If this resistance is sustained in the coming days, it will reflect the continuation of a medium-term trading range on oil.

  • The price trading above rising moving averages is encouraging for the near-term outlook.
  • The daily RSI has been improving but has turned lower again just under 60. This likely reflects the continuation of a trading range.

The market is backing away from the February lower high resistance at $86.90. I

However, if the market can brush off the early slip lower this morning, it will be an important signal that recovery potential is building.

Support at $82.50 will be an important higher low.


The outlook for the AUD is looking less encouraging. 

There is a downtrend and correction over the past month which has dragged the market back to test the important support band 0.6585/0.6685.

The early move lower today is negating much of Friday’s strong bull candle. The near to medium-term corrective pressures continue.

  • The price is trading under the 21 and 55-day moving averages
  • The daily RSI is consistently stuck under 50.

This all still points towards selling into near-term strength. The initial resistance of last week’s high at 0.6783 will be a gauge in the coming days.

The technical outlook points towards further pressure on the 0.6585/0.6685 support band. 

However, we are mindful of tomorrow’s Reserve Bank of Australia monetary policy meeting. This will likely have a significant impact on the outlook for the AUD. 

Support and resistance levels for Forex, Commodities, and Futures/Indices

EUR/USD R2 1.0691
R1 1.0672
S1 1.0619
S2 1.0588


R2 1.2088
R1 1.2048
S1 1.2018
S2 1.1962
USD/JPY R2 136.42
R1 136.05
S1 135.25
S2 134.21


R2 1870
R1 1860
S1 1849
S2 1839


R2 31.64
R1 21.39
S1 21.13
S2 20.84
Brent Crude Oil
R2 86.90
R1 86.15
S1 85.10
S2 82.50


S&P 500 futures
R2 4145
R1 4090
S1 4024
S2 4004
DAX Index 
R2 15,725
R1 15,660
S1 15,560
S2 15,487
FTSE 100 Index
R2 8016
R1 7973
S1 7917
S2 7871

Data: MT5/IXOne

This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

All trading carries risk.