• China’s manufacturing activity shrank for a second month in August.

• China’s economic outlook remains uncertain.

• Falling Chinese iron ore prices are bound to hurt the Australian dollar pushing AUD/USD lower.

Today’s AUD/USD outlook is bearish. The Chinese manufacturing activity numbers, which were issued Wednesday morning and showed that it shrank for a second month in August, don’t seem to have had much impact on the Australian Dollar. 

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The purchasing managers’ index (PMI) reading from the National Bureau of Statistics came in at 49.4, higher than the 49.2 consensus estimate from Bloomberg.

China’s manufacturing sector last experienced growth in June, although it was highly modest (50.2), marking a historically slow expansion for the greatest exporter in the world. 

Since central banks worldwide are tightening policy, the prolonged output depression might not get better soon. The consumer demand is anticipated to be further muted as a result.

Recently, the People’s Bank of China (PBOC) and the central government have intensified their encouraging actions. They also have plans to support credit development and mitigate the effects of the nation’s real estate problem, but those plans could be too little, too late. 

Although policymakers can support lending, the adverse economic effects of real estate loans are already affecting banks.

Furthermore, lowering benchmark lending rates will result in further profit margin compression, necessitating further government assistance. 

Although today’s PMI results exceeded expectations, traders will not change their outlook on the Chinese economy anytime soon. Chinese iron ore prices are trading lower, which will probably hurt the Australian Dollar.

AUD/USD key events today

The US ADP National Employment Report is based on the payroll information of almost 400,000 U.S. company clients and measures the monthly change in non-farm, private employment. The publication, which comes out two days before official government data, is a reliable indicator of the non-farm payroll report.

AUD/USD technical outlook: Retesting the 30-SMA

Looking at the 4-hour chart, we see the price trading below the 30-SMA and the RSI below 50; all showing bears are in control. Bears could not break below the 0.68513 support level, and the price is retesting the 30-SMA. 

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Bears will likely try to break below 0.68513 if the SMA holds as resistance. However, if the SMA fails to hold as resistance, the price might retest 0.69507 and 0.70006.

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