AUD/USD: Trading the Chinese Flash PMI Jan 2014

Chinese Flash Manufacturing  PMI (Purchasing Managers’ Index) 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. 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 Thursday 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.

Chinese Flash Manufacturing  PMI has indicated expansion in the Chinese manufacturing sector in recent readings, but just barely, with recent readings just above the 50-point level. More of the same is expected in the  December release, with the estimate standing at  50.6 points.

Sentiments and levels

The  Aussie  continues to tumble, and has fallen below the 0.88 level for the first time in over three years.  With QE a reality in the US and another taper expected in the near future, the Aussie could lose more ground. The currency continues to be weighed down by the RBA, which has made no secret that it wants the Australian dollar trading at lower levels. So, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 0.9180, 0.9000, 0.8893, 0.8728, 0.8578  and 0.8432.

5 Scenarios

1. Within expectations: 53.0 to 56.0: In such a case, AUD/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations:  56.1 to 59.0: An unexpected higher reading can send the pair above one resistance line.
3. Well above expectations: Above  59.0: Such an outcome would likely push the pair upwards, and a second resistance line might be broken as a result.
4. Below expectations:  50.0 to 52.9: A weaker reading  than forecast could push AUD/USD downwards and break one level of support.
5. Well below expectations: Below 50.0: A reading below the 50 line would indicate contraction in the Chinese manufacturing sector and could see the pair break below a second support level.

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

To follow this event live:   [do action=”calendar-event” eventid=”80b0adcf-cfa9-4583-9d3a-f720a4a3f5fa”/]