AUD/USD: Trading the Chinese Caixin PMI August 2015

Chinese Caixin Flash Manufacturing PMI 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, and 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 Friday 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.

Since  February, the index has been  unable to break  the 50-point level, which separates contraction from expansion. The index  slipped to  48.2 points in July, short of the forecast of 49.8 points. It marked the index’s weakest reading since February March. The estimate for  August stands at 49.4 points.

Sentiments and levels

Monetary divergence continues to weigh on the Aussie, as the Fed contemplates the timing of a rate hike while Australian rates remain at low levels. With no major data out of Australia this week, US numbers will have a greater impact on the movement of AUD/USD.  So, the overall sentiment is  bullish on AUD/USD towards this release.

Technical levels, from top to bottom: 0.7692, 0.7597, 0.7438, 0.7266, 0.7113  and 0.7011.

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 56.0: An unexpected higher reading can send the pair above one resistance line.
3. Well above expectations: Above  56.0: 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  sharp contraction  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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