AUD/USD: Trading the Chinese PMI Nov 2015

Chinese Caixin Flash Manufacturing PMI is based on a survey of purchasing managers in the manufacturing sector. Respondents are surveyed for their view of the economy and business conditions in China, and a  reading which is higher than the market forecast is bullish for the Australian dollar.

Here are all the details, and 5 possible outcomes for AUD/USD.

Published on Tuesday at 1:45 GMT.

Indicator Background

Traders should pay close attention to this key release, as China is Australia’s number one trading partner, and an unexpected reading can quickly affect the direction of AUD/USD.

The index has been  unable to break  the 50-point level since February,  pointing to ongoing contraction in the manufacturing sector. The index  improved to 48.3 points in October,  above the forecast of 47.7 points. The markets are expecting the indicator to remain at 48.3 points in November.

Sentiments and levels

I am  bearish  on AUD/USD

With the Federal Reserve likely to raise rates at this week’s meeting, the greenback  is poised to post gains against its rivals,  even if Nonfarm Payrolls softens in November. The Australian economy has  not kept pace with the US economy, and if the RBA Rate Statement makes reference to weak growth or low inflation, the Australian dollar could lose ground. So, the overall sentiment is  bullish on AUD/USD towards this release.

Technical levels, from top to bottom: 0.7533, 0.7440, 0.7284, 0.7160, 0.71 and  0.70.

5 Scenarios

1. Within expectations: 45.0 to 52.0: In such a case, AUD/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations:  52.1 to 56.0: An unexpected higher reading can send the pair above one resistance line.
3. Well above expectations: Above  56.0: The likelihood of a sharp expansion is low. Such an outcome would push the pair upwards, and a second resistance line might be broken as a result.
4. Below expectations:  41.0 to 44.9: A  lower reading  than forecast could push AUD/USD downwards and break one level of support.
5. Well below expectations: Below 41.0: A  sharp contraction  could hurt  the Australian dollar and push the pair below a second support level.

For more on the Australian dollar, see the AUD/USD forecast.