AUD/USD: Trading the Chinese HSBC Flash Manufacturing PMI

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 Tuesday 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  February release, the index  came in at 50.1 points,  just above  the 50-point line, which separates expansion from contraction. This beat the  estimate of 49.6 points. The markets are expecting little change, with an estimate of 50.5 points for the March release.

Sentiments and levels

The Aussie enjoyed a strong week, but this was more a case of greenback weakness rather than strength on the part of the Australian dollar. The Fed may have dampened expectations of a rate hike in the next few months, but if US employment data and the GDP release are strong, the dollar could reverse directions this week. So, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 0.8077, 0.7978, 0.7799, 0.7692, 0.7601  and 0.7403.

5 Scenarios

1. Within expectations: 46.0 to 54.0: In such a case, AUD/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations:  54.1 to 58.1: An unexpected higher reading can send the pair above one resistance line.
3. Well above expectations: Above  58.1: 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:  42.0 to 45.9: A sharper decrease than forecast could push AUD/USD downwards and break one level of support.
5. Well below expectations: Below 42.0: 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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