AUD/USD: Trading the HSBC Chinese Flash PMI Jan 2015

The HSBC 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 Friday 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.

In the  December release, the index dropped  to 49.5 points, the first time it has  fallen below the 50-point line since May. The 50-point level separates contraction from  expansion. No change is expected in the January reading.

Sentiments and levels

The Aussie managed to hold its own last week, but market sentiment remains bullish on the US economy  and  the  greenback has resumed posting gains, as AUD/USD is struggling to stay above the key 0.80 level. Monetary divergence between the Fed and RBA will continue to weigh on the Australian dollar. Thus, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 0.8466, 0.8313, 0.8150, 0.8013, 0.7978  and 0.7904.

5 Scenarios

1. Within expectations: 46.0 to 53.0: In such a case, AUD/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations:  53.1 to 57.1: An unexpected  strong reading can send the pair above one resistance line.
3. Well above expectations: Above  57.1: Given the current trend, the likelihood of a sharp expansion is low. Such an outcome would likely  push the pair upwards, and a second resistance line might be broken as a result.
4. Below expectations:  43.0 to 45.9: 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  push the pair below a second support level.

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

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