AUD/USD – Steady after Weak Chinese PMI

The Australian dollar is steady against its US counterpart, but remains under pressure, following disappointing Chinese data. AUD/USD was trading in the mid-1.02 range in Tuesday’s European session. In the US, today’s highlight is New Home Sales. The markets will be hoping for a solid release, after sluggish numbers on Monday from Existing Home Sales.

The Aussie has not reacted to weak Chinese data earlier on Tuesday. Chinese Flash Manufacturing PMI dropped from 51.7 points to 50.5 points. This was well below the estimate of 51.4 points. This key index has been above the 50 point level since last October, indicating expansion in the Chinese manufacturing sector. However, the lower than expected reading could spell trouble for the Australian currency, as China is Australia’s number one trading partner, and decreased manufacturing by the Asian giant could translate into less demand for Australian exports. The other Australian release, CB Leading Index, gained 0.3%, up from 0.2% in the previous release.

There has been plenty of talk about USD/JPY breaking the 100 level. Although the pair has come close, the three digit barrier remains elusive. The yen lost ground on Monday, as the G20 meeting, which wrapped up on Friday, did not censure Japan for its easing policies which have sent the yen plunging. Japanese officials were pleased with the outcome, as they feel there is now less pressure on the government to continue its easing policies, which will likely push the yen down even further. The Japanese currency has lost 20% of its value in the past six months, and most analysts believe it is only a matter of time before it falls below the 100 level.

 What’s wrong with the US? The country’s economic releases continue to disappoint the markets, as last week’s key releases fell below expectations. Last week, there was more bad news, as employment and manufacturing numbers missed the mark. Unemployment Claims came in at 352 thousand, higher than the estimate of 349 thousand. The Philly Fed Manufacturing Index dropped from 2.0 points to 1.3 points, nowhere near the estimate of 2.7 points. This week started no better, as Existing Home Sales came in at 492 million, well off the estimate of 5.02 million. The markets are hoping that Tuesday’s numbers look better.

 

AUD/USD for Tuesday, April 23, 2013

Forex Rate Graph 21/1/13
 

AUD/USD April 23 at 12:15 GMT

1.0251 H: 1.0265 L: 1.0221

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
1.0100 1.0174 1.0230 1.0298 1.0350 1.0424

 

AUD/USD remains steady in Tuesday trading. The proximate resistance and support levels remain intact (R1 and S1 above). The pair is receiving support at 1.0230. This weak line could be tested if the Aussie loses more ground. This is followed by s strong support level at 1.0174. On the upside, 1.0298 is providing resistance. This line is protecting the 1.03 level. This is followed by a resistance line at 1.0350.

Current range: 1.0230 to 1.0298

Further levels in both directions:

  • Below: 1.0230, 1.0174, 1.01 and 1.008
  • Above: 1.0298, 1.0350, 1.0424, 1.0508 and 1.0568

 

OANDA’s Open Position Ratios

The AUD/USD ratio is pointing to movement towards long positions. We are not seeing this trend in the pair at present, as AUD/USD trades quietly. The movement in the ratio could signal that the pair will break out and push higher. The ratio has an overwhelming majority of long positions, indicating that trader sentiment is strongly biased towards the Aussie making inroads against the US currency.

The Australian dollar has taken a tumble in April, and remains under pressure. There is still room for the Aussie to lose ground, and much will depend on Wednesday’s Australian CPI release.

 

AUD/USD Fundamentals

  • Australian CB Leading Index. Estimate 0.3%
  • 13:00 US Flash Manufacturing PMI. Estimate. 53.8 points.
  • 13:00 US HPI. Estimate 0.7%.
  • 14:00 US New Home Sales. Estimate 416K.
  • 14:00 US Richmond Manufacturing Index. Estimate 3 points.

 

*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.