AUSTRALIAN DOLLAR, AUD/USD, CHINA PMI, PCE – MARKET ALERT:
It looks like the Australian Dollar wasn’t able to keep its gains from the recent news about Chinese industrial activity. The manufacturing PMI in China for March was 51.9, just a bit lower than February’s 52.6, but still better than the predicted 51.6. The non-manufacturing PMI was even higher at 58.2, surpassing the predicted 55 and reaching its highest level since May 2011 at 56.3 prior.
Know that when the economic activity readings are above 50, it means things are looking up, but when they’re below, it could indicate some trouble. It seems like the data is suggesting that China is on the road to recovery after changing its Covid-zero policy.
Did you know that traders think the Australian Dollar is a great way to keep an eye on China’s economy? It’s because China is Australia’s biggest trading partner. So, when things are going well in China, it usually means good news for Australia too! And this can affect how the Reserve Bank of Australia decides on its monetary policy.
The newest info on cash rate futures shows that it’s unlikely for the RBA rates to change in April. Some folks were betting on a rate cut, but it seems that those predictions are becoming less popular. The Australian CPI was unexpectedly lower in February, which might be why people are expecting a pause in changes. It doesn’t seem like the recent Chinese data had much impact on what traders are thinking about RBA’s future plans.
The next 24 hours are pretty important for US Core PCE data. This is the inflation gauge that the Fed likes to use, and it’s expected to drop to 5.1% y/y from the previous 5.4%. However, if it doesn’t drop as much as people thought, this could lead to traders losing faith in a Fed rate cut. This might mean that the US Dollar could start to pick up again after not being so popular lately.
Market Reaction to China PMI
Australian Dollar Technical Analysis
It looks like the AUD/USD is on an upward trend for the near future. This is shown by the rising trendline from March on the daily chart below. We’re seeing some support coming up soon, which is a combination of the 50-day Simple Moving Average and the 38.2% Fibonacci retracement level at 0.6781. If things take a turn for the worse though, and we close under that line, it could expose us to some risks with regards to early March lows.