AUD/USD: Trading the Chinese Flash PMI Feb 2013


Chinese Flash Manufacturing PMI is based on a survey of purchasing managers in the manufacturing sector. This indicator is a key release, and should be treated as a possible market-mover. A reading which is better than the market forecast is bullish for the Australian dollar.

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

Published on Monday 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 release could affect the movement of AUD/USD.

Chinese Flash Manufacturing PMI has been showing slow but steady growth in recent readings, and has been above the 50 point level since November. This indicates ongoing expansion in the Chinese manufacturing sector. The estimate for the February release is slightly higher, at 52.2 points. Will the indicator meet or beat the upcoming forecast? 

Sentiments and levels

Recent Australian releases have not been all that impressive, and although the RBA did not lower its key interest rate earlier this month, it did leave the door open for additional cuts in the near future, if the economy does not show improvement. As well, if the US recovery continues to be bumpy, investors will be more risk-averse and prefer the safe-haven US dollar or over the riskier Aussie. Thus, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 1.0418, 1.0371, 1.0326, 1.0230, 1.0174 and 1.0080.

5 Scenarios

  1. Within expectations: 49.0 to 55.0 points: In such a case, AUD/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 55.1 to 58.0: An unexpected higher reading can send the pair above one resistance line.
  3. Well above expectations: Above 58.0: Such an outcome would push the pair upwards, and a second resistance line might be broken as a result.
  4. Below expectations: 46.0 to 48.9: A weaker reading than forecast could result in one support level being broken.
  5. Well below expectations: Below 46.0: A reading well below the 50 level could hurt the Australian dollar. This outcome could push the pair below a second support level.

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

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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