Yet again, a recovery attempt by the Australian dollar met Chinese resistance. It was the same HSBC/Markit Flash Manufacturing PMI for China that triggered the emerging markets’s turmoil in late January and hurt the Aussie that hit the A$ now.
AUD/USD was trading above 0.90, a clear separator before the event. After the publication, the pair dropped as low as 0.8938. A recovery attempt fell short of reconquering the round number. From here, will we see a break or a bounce?
Here is the chart:
The HSBC/Markit report is an independent one, and this makes it more reliable than the official Chinese data. China is Australia’s No. 1 trade partner.
The figure came out at 48.3 for February, contrary to 49.5 in January and 49.4 expected. The 50 point mark separates contraction from growth. This is a seven month low. The new orders component, which is forward looking is now falling after rising last time.
The clear disappointment raises worries that China’s “landing” is not that soft and that the transition of China from exports to consumption is still slow. With Australia’s transition from mining to other sectors also taking its time, this is worrying for Australia as well.
AUD/USD
0.90 remains a clear line that cuts two trading ranges. Despite USD weakness in the following session, the pair has not been able to climb back up. Support lies at 0.8910. Resistance above 0.90 is at 0.9050.
For more lines, events and analysis, see the AUDUSD forecast.
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