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.