AUD/USD: Trading the Chinese Flash PMI Feb 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.

The December release dipped below the 50-point level, coming in at 49.6 points. This marked the first time since June that the reading  moved below 50,  which indicates contraction in the industry. A similar reading is expected for January, with an estimate of 49.4 points.

Sentiments and levels

The Aussie had another  positive week, and is back trading above the 0.90 level. However, the RBA wants to see the currency trading at lower levels, so we could  see RBA officials try to “talk down” the Australian dollar. In the US, employment  numbers remain a concern, but the markets are content with the general direction of the US economy.  So, the overall sentiment is  neutral on AUD/USD towards this release.

Technical levels, from top to bottom: 0.9442, 0.9283, 0.9180, 0.90, 0.8893 and 0.8728.

5 Scenarios

1. Within expectations: 47.0 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 56.1: An unexpected higher reading can send the pair above one resistance line.
3. Well above expectations: Above  56.1: Given the current trend, 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:  43.0 to 46.9: A sharper decrease than forecast could push AUD/USD downwards and break one level of support.
5. Well below expectations: Below 43.0: A very poor reading  could impact on  the Australian dollar and push the pair below a second support level.

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

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