China PMI overview
Early on Friday, China Federation of Logistic and Purchasing will release May month’s official purchasing manager index (PMI) numbers around 11 am Sydney/01am GMT.
While Bloomberg has already conveyed its dovish outlook for the Chinese economy based on early indicators, the market expects NBS Manufacturing PMI to slip into the activity contraction region with 49.9 figure against 50.1 prior. Non-manufacturing PMI, on the other hand, bears upbeat expectations of a rise to 54.5 from 54.3.
Westpac was also signaling 49.9 figure for the manufacturing PMI but expects no change in figures of non-manufacturing PMI.
Additionally, TD Securities gave the following statements concerning the data ahead of the release:
China’s manufacturing PMI disappointed in April, albeit remaining in expansion territory. Worsening in trade tensions with the US has likely weighed further on manufacturing confidence, especially given the sudden escalation, indicating that the PMI will drop back into contraction territory. We expect a reading of 49.8 from 50.1 in May, with the decline likely limited by ongoing stimulus measures by China’s authorities. CNY weakness will also help to provide a buffer for manufacturing exporters but the outlook for manufacturers has clearly worsened.
How could it affect the AUD/USD?
Considering latest downtick from global economic data, mainly from Asian frontier, coupled with expectations of a rate cut from the Reserve bank of Australia (RBA), sluggish PMI outcomes from its largest customer can drag Australia’s currency further towards the south.
FXStreet Analyst, Valeria Bednarik, spots bearish 100 SMA favoring further Aussie slides:
From a technical point of view, the pair maintains a neutral-to-bearish stance, having spent the week confined to a 40 pips’ range. In the 4 hours chart, a directionless 20 SMA converges with a bearish 100 SMA, with the price failing around this last earlier this week. Technical indicators in the mentioned chart gain downward momentum within negative levels, in line with further slides ahead.
Support levels: 0.6895 0.6865 0.6825
Resistance levels: 0.6935 0.6965 0.7000
Key Notes
AUD/USD Analysis: technically bearish, Chinese data in the way
AUD/USD recovers to 0.6915, all eyes on China’s PMI
AUD/USD technical analysis: Small rebound at the 0.6900 handle
About the China NBS Manufacturing PMI
The Manufacturing Purchasing Managers Index (PMI) released by the China Federation of Logistics and Purchasing (CFLP) studies business conditions in the Chinese manufacturing sector. Any reading above 50 signals expansion, while a reading under 50 shows contraction. As the Chinese economy has influence on the global economy, this economic indicator would have an impact on the Forex market.
About the China Non-Manufacturing PMI
The official non-manufacturing PMI, released by China Federation of Logistics and Purchasing (CFLP), is based on a survey of about 1,200 companies covering 27 industries including construction, transport and telecommunications. It’s the level of a diffusion index based on surveyed purchasing managers in the services industry and if it’s above 50.0 indicates industry expansion, below indicates contraction.
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