AUD/USD: Aussie Gains on Strong Chinese Manufacturing PMI

The Australian dollar has started the week in style, climbing to two-months highs on Monday. In the European session, the pair is trading in the mid-0.94 line. The Aussie received a boost from a strong Chinese Manufacturing PMI, which hit an eight-month high in May. In the US, today’s highlight is Existing Home Sales. There are no Australian releases on Monday.

Key Chinese releases often have an impact on the movement of AUD/USD, as China is Australia’s number one trading partner. On Monday, Chinese Flash Manufacturing PMI moved above the 50-point level for the first time since November, pointing to expansion in the manufacturing sector. The strong reading helped the Aussie push as high as 0.9445 on Monday.

The Federal Reserve continued to trim its QE program last week, reducing the scheme by $10 billion, to $35 billion/month. If all goes as planned, the Fed could wind up QE in the fall. The Fed also hinted that interest rates will continue to stay low for the foreseeable future, which likely means that we won’t see any rate hikes before the first quarter of 2015. With regard to economic activity, the Fed noted that the recovery is continuing, but it reduced its forecast of economic growth to 2.1-2.3%, down from an earlier forecast of around 2.9 percent. The bottom line? There were no dramatic items in the Fed statement, with one analyst describing current Fed policy as “steady as she goes”.

There was positive economic news out of the US on Thursday, as Unemployment Claims dipped to 312 thousand last week, beating the estimate of 316 thousand. As well, the Philly Fed Manufacturing Index, which has been on the upswing for most of 2014, continued the trend and improved to 17.8 points, crushing the estimate of 14.3. This was the index’s strongest reading since last August, and points to a manufacturing sector which is expanding in order to keep up with increasing demand.

 

AUD/USD for Monday, June 23, 2014

AUD/USD June 23 at 12:20 GMT

AUD/USD 0.9433 H: 0.9445 L: 0.9383

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9119 0.9229 0.9361 0.9446 0.9617 0.9757

 

  • AUD/USD posted gains in the Asian session and moved across the 0.94 line. The pair is unchanged in the European session.
  • 0.9361 is a strong resistance line.
  • On the upside, 0.9446 has weakened as the Aussie pushes higher. 0.9617 is stronger.

Further levels in both directions:

  • Below: 0.9361, 0.9229, 0.9119 and 0.9000
  • Above: 0.9446, 0.9617, 0.9757 and 0.9847

 

OANDA’s Open Positions Ratio

AUD/USD ratio is pointing to gains in long positions on Monday. This is consistent with the movement of the pair, as the Australian dollar has posted gains. The ratio has a majority of short positions, indicative of trader bias towards the US dollar reversing directions and moving higher.

 

AUD/USD Fundamentals

  • 13:45 US Flash Manufacturing PMI. Estimate 56.1 points.
  • 14:00 US Existing Home Sales. Estimate 4.74M.

*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.