AUD/USD: Trading the Chinese Flash PMI Jun 2013

 

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.

In the May release, the index fell below the 50-point line, to 49.4 points. A reading   below 50 indicates contraction. This was the first time the PMI dropped below the 50 level in 2013.  The markets are expecting little change, with an estimate of 49.4 points. Will the index surprise the markets and cross above the 50 level?

Sentiments and levels

AUD/USD managed to push higher last week,  taking  advantage of strong domestic employment numbers as well as a broadly weaker US dollar. This week is a different story, as the Aussie is back to its losing ways. Most Australian releases  have  been lukewarm or worse, and if the US Federal Reserve hints at tapering QE in the upcoming FOMC statement, we could see the  Aussie ground in a hurry. Thus, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 0.9797, 0.9634, 0.9549, 0.9428, 0.9275  and 0.9171.

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 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 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 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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