AUD/USD: Trading the Chinese Flash PMI Nov 2012

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

Analysts are always interested in the views of purchase managers about the economy, as they are considered to be attuned to the latest economic and financial developments, and their expectations could be an indication of future economic trends. Thus, PMI readings are quite important and an unexpected reading could affect the movement of AUD/USD.

This PMI has been below the important 50.0 line since last October, indicating ongoing slight contraction in the Chinese manufacturing sector. However, the  index  improved last month  to 49.1 points, and the markets will be hoping that the PMI will break above the 50.0 level in November.

Sentiments and levels

 AUD/USD has been rather quiet for the past few weeks. Is this about to change? Last week saw some weak US data, as employment numbers and consumer data were well sluggish. If this trend continues, investors could get cold feet and flock to the safety of the greenback, at the expense of the Australian dollar. So, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 1.0655, 1.0508, 1.0402, 1.0326,  1.0230 and 1.0174.

5 Scenarios

1. Within expectations: 45.0 to 51.0: In such a case, AUD/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 51.1 to 54.0: An unexpected higher reading can send the pair well above one resistance line.
3. Well above expectations: Above 54.0: A sharp expansion in the manufacturing sector could push AUD/USD upwards, and a second resistance line might be broken as a result.
4. Below expectations: 42.0 to 44.9: A weak reading could push AUD/USD downwards and break one level of support.
5. Well below expectations: Below 42.0: A sharp contraction would indicate deeper weakness in the Chinese manufacturing sector. This would likely push the pair downwards, possibly breaking a second support level.

For more about the yen, see the AUD/USD forecast.