Chinese imports shrinks fast, exerts pressure on Commodity currencies

Chinese customs authority released stats of May trades today and it is another devastating showdown for exporters dependent on Chinese demand.

• Chinese trade balance was positive at $59.5 billion, but that came in the back of heavy import slowdown. Chinese export slowed by 2.5% in May, from a year ago, while imports slowed by 17.6% in May from a year ago, after heavy shrinkage in April by -16.2% y/y.

Data is showing the stress exporters to Chinese economy such as Australia, New Zealand, and Chile are going through as economy slows down further.

• These economies will face tough times, adjusting to China's slowdown after decades of heavy dependence.

Australian dollar is down heavily after the data is released and US Non-farm report surprised on the upside.

Australian dollar is currently trading at 0.761, close to key support level of 0.75-0.756. Bears are threatening to break beyond the support. Expect Aussie to trade as low as 0.71-0.72 if the support breaks down. Preferred trade remains sell resistance or selling at rallies. Resistance lies around 0.775-0.78.