AUD/USD – Under Pressure As Chinese Manufacturing PMI Slides

The Australian dollar continues to point downwards, and has lost about a cent this week against the US currency. AUD/USD has dropped to the mid-0.89 level in Thursday trade. In economic news, Chinese Manufacturing PMI weakened in January and fell short of expectations. In the US, Unemployment Claims and Core CPI matched the forecast. We’ll get a look at the Philly Fed Manufacturing Index later in the day. There are no Australian releases on Thursday.

The Aussie is struggling this week, and has dipped below the key 0.90 level. The currency is sensitive to key Chinese releases, as China is Australia’s number one trading partner. Chinese Manufacturing PMI pointed to contraction mode for a second straight month, coming in below the 50-point level. The index dropped to 48.3 points, its lowest level in eight months. A decrease in Chinese manufacturing could have serious consequences for the Australian economy and weigh on the shaky Australian dollar.

In the US, Unemployment Claims improved, dropping to 336 thousand. This was just shy of the estimate of 335 thousand. After some recent weak releases on the employment front, the markets will be pleased with this release. Meanwhile, inflation indicators continue to raise concerns, as Core CPI posted a paltry gain of 0.1% for the second straight month. Weak inflation levels are indicative of weak economic growth and could spell trouble for the US recovery.

According to the Federal Reserve minutes, which were released on Wednesday, we’re unlikely to see interest rates rise if unemployment drops to 6.5%. Previously, the Fed had said they would consider raising rates at the 6.5% threshold, but with unemployment falling faster than expected, Fed policymakers agreed that it would “soon be appropriate” to revise the Fed’s forward guidance regarding interest rate levels. The minutes also show that the Fed will likely continue trimming QE, barring any downturns in the economy.

 

AUD/USD for Thursday, February 20, 2014

Forex Rate Graph 21/1/13

AUD/USD February 20 at 14:15 GMT

AUD/USD 0.8964 H: 0.9013 L: 0.8937

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.8658 0.8735 0.8893 0.9000 0.9119 0.9229

 

  • AUD/USD has lost ground in Thursday trading. The pair moved higher early in the European session, but has reversed course and surrendered most of those gains.
  • 0.8893 is providing support. It could face pressure if the Aussie continues to lose ground. This is followed by support at 0.8735.
  • The key levels of 0.90 has switched to a resistance role. Next, there is resistance at 0.9119.
  • Current range: 0.8893 to 0.9000

 

Further levels in both directions:

  • Below: 0.8893, 0.8735, 0.8658 and 0.8516
  • Above: 0.9000, 0.9119, 0.9229, 0.9361 and 0.9466

 

OANDA’s Open Positions Ratio

AUD/USD ratio has reversed directions on Thursday, pointing to gains in long positions. This is not consistent with what we are seeing from the pair, as the Australian dollar is losing ground. AUD/USD ratio continues to have a majority of long positions, reflecting a trader bias towards the Aussie turning around and moving higher against the US currency.

AUD/USD is back below the 0.90 level. Early in the North American session, the Aussie remains under strong pressure.

 

AUD/USD Fundamentals

  • 13:30 US Core CPI. Estimate 0.1%. Actual 0.1%.
  • 13:30 US Unemployment Claims. Estimate 335K. Actual 336K.
  • 13:30 US CPI. Estimate 0.1%. Actual 0.1%.
  • 14:00 US Flash Manufacturing PMI. Estimate 53.6 points. Actual 56.7 points.
  • 15:00 Eurozone Consumer Confidence. Estimate -11 points.
  • 15:00 US Philly Fed Manufacturing Index. Estimate 9.2 points.
  • 15:00 US Flash Mortgage Delinquencies.
  • 15:00 US CB Leading Index. Estimate 0.5%.
  • 15:30 US Natural Gas Storage. Estimate -255B.
  • 16:00 US Crude Oil Inventories. Estimate 2.1M.

*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.