Chinese official Purchasing Managers’ Index (PMI) came in at 50.1 after seasonal adjustments. Though a figure still represent growth, the growth rate has cooled down significantly, climbing down from January’s 50.4 and clocking in the weakest read in 5 months. New orders fell, indicating that domestic demand is declining, which should be a cause of concern for heavy exporters to China such as Australia and New Zealand. Strangely, AUD/USD remain muted after the news and in fact rallied higher shortly after. In comparison, Asian stocks indices fell, though a major portion of the fall can be attributed to the failure to pass bills in the US Senate aimed to postpone the sequesters once more.
15 Minutes Chart
Without further information, the only logical explanation for the rally in AUD/USD would be to assume that prices are simply experiencing a technical rebound from 1.02 low, after falling heavily during Europe/US trading hours yesterday. If this is a pure technical move, then the likelihood of price able to enter and break the bearish Kumo is lower. 1.023 which is the lower band of the consolidation area 1.023-1.0245 will also provide further resistance to push price lower, agreeing with Stochastic readings which has accelerated quickly into the Overbought region. However, it remains to be seen whether price will correct sharply into the descending channel, or find support along Channel Top. Alternatively, should price push above 1.0245, the bearish bias may need to change to a bullish one.
From the point of view of Daily, the descending channel is still in play, agreeing with Short-term bearish momentum. However, the leeway for bullish reversal would need to see price breaking not only above the Channel Top, but preferably above 1.035 Dec swing low as a confirmation of bullish bias. Stochastic readings is looking a bit confused, as Stoch/Signal lines were threatening to cross at one point but is currently unlikely seeing how price is heading lower now. If short-term bullishness strengthen, we could still see price testing Channel Top without breaking bearish bias.
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