AUD/USD – Volatile After Weak Chinese Data

AUD/USD is showing volatility in Monday trading, has the pair has dropped and then rebounded following the release of weak Chinese Manufacturing data. The Aussie reacted as Chinese Flash Manufacturing PMI was well below the market estimate. There is only one Australian release on Monday, with RBA Assistant Governor Guy Debelle speaking at the University of Adelaide. There are no scheduled releases out of the US on Monday.

The Australian dollar often reacts to key Chinese data, as the Asian giant is Australia’s most important trading partner. AUD/USD dropped sharply in early Monday trading after the release of Chinese Flash Manufacturing PMI, which fell to a three-month low. The index barely stayed above the 50 point threshold, posting a reading of 50.4 points. This was well below the estimate of 52.2, and raises concerns about the health of the Chinese economy. The markets will get another look at Chinese data late in the week, with the release of Chinese Trade Balance and CPI. The Australian dollar recovered in the Asian session, and climbed back to the low-1.03 range. 

In the US, the Federal Reserve was back in the limelight last week, following the release of the minutes of its most recent policy meeting. In the meeting, members raised the possibility of ending the current round of QE even before the US employment situation improves, due to concern about the negative effect that QE could have on the financial markets. The Fed has left QE open-ended, but has previously stated that it would not end before unemployment fell to 6.5%. Meanwhile, the markets are having a tough time measuring the extent of the US recovery, as US data continues to paint a mixed picture. Last week’s numbers pointed to more of the same. Unemployment Claims came in higher than forecast, disappointing the markets. Existing Home Sales managed to beat the estimate, but Housing Starts failed to meet expectations. The manufacturing sector continues to stumble, as the Philly Fed Manufacturing Index dropped sharply. The disappointing US numbers could spell bad news for the Australian dollar, since concern over the health of the US economy is likely to weaken risk sentiment, weighing on riskier assets such as the Aussie.

 

AUD/USD for Monday, February 25, 2013

Forex Rate Graph 21/1/13 

AUD/USD February 25 at 12:30 GMT

1.0322 H: 1.0329 L: 1.0263

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
1.0080 1.0174 1.0230 1.0334 1.0424 1.0568

 

AUD/USD has had a very busy start to the trading week, posting sharp declines and rises in Monday’s trading session. The pair faces weak resistance at 1.0334, and this line could face more activity if the pair continues to fluctuate. The next line of resistance is at 1.0424, which has remained intact since early February. On the downside, the pair is receiving support at 1.0230. This is followed by a support level at 1.0174.

Current range: 1.0230 to 1.0334.

Further levels in both directions:

  • Below: 1.0230, 1.0174, 1.0080, 1.00 and 0.9948.
  • Above: 1.0334, 1.0424, 1.0568, 1.0605, 1.0718 and 1.0874.

 

OANDA’s Open Position Ratios

Despite the volatility we are seeing in the Australian dollar as we begin the new trading week, AUD/USD ratio remains quiet. However, if the pair continues to show strong fluctuation, we can expect the ratio to swing into action as well. Trader sentiment continues to be strongly biased towards long positions, indicating an expectation that the Australian dollar will show improvement against the greenback.

AUD/USD started the week with sharp fluctuations, following the release of weak Chinese manufacturing data. With little in the way of fundamental releases on Monday, we could see the pair settle down in the low-1.03 range. 

 

AUD/USD Fundamentals

  • 1:45 Chinese Flash Manufacturing PMI. Estimate 52.2 points. Actual 50.4 points.
  • 21:15 Australian RBA Assistant Governor Guy Debelle Speaks.

 

*Key releases are highlighted in bold

*All release times are GMT

 

 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.