– China HSBC PMI Manufacturing to Improve for Second Consecutive Month
– Survey Has Held Below the 50.0 Mark Throughout 2014
Trading the News: China HSBC Purchasing Manager Index Manufacturing
Despite the ongoing contraction in China manufacturing, another uptick in the HSBC’s Purchasing Manager Index may generate a meaningful rebound in the AUD/USD as the pair sits at the 0.9200 support zone.
What’s Expected:
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Why Is This Event Important:
Positive developments coming out of China – Australia’s largest trading partner – may heighten the appeal of the Australian dollar as the Reserve Bank of Australia (RBA) retains a rather neutral tone for monetary policy, and Governor Glenn Stevens may look to keep the benchmark interest rate on hold throughout the remainder of the year as the central bank head remains upbeat on the $1T economy.
Expectations: Bullish Argument/Scenario
Release
Expected
Actual
MNI Business Confidence Indicator (MAY)
—
53.7
Producer Price Index (YoY) (APR)
-1.9%
-2.0%
Trade Balance (APR)
$16.70B
$18.46B
Easing input prices paired with the rebound in business sentiment may spur a marked rise in productivity, and a positive development may spur a near-term advance in the AUD/USD as it raises the RBA’s scope to move away from its easing cycle.
Risk: Bearish Argument/Scenario
Release
Expected
Actual
Industrial Production (YoY) (APR)
8.9%
8.7%
Retail Sales (YoY) (APR)
12.2%
11.9%
New Yuan Loans (APR)
800.0B
774.7B
Nevertheless, businesses may continue to scale back on production amid the slowdown in household consumption along with the weakening outlook for private sector lending, and a dismal print may pave the way for a larger decline in the AUD/USD as it dampens the outlook for the Australian economy.
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How To Trade This Event Risk(Video)
Bullish AUD Trade: China Manufacturing Exceeds Market Forecast
Need green, five-minute candle following the statement for a potential long Australian dollar trade
If market reaction favors a long trade, buy AUD/USD with two separate position
Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward
Move stop to breakeven on remaining position once initial target is met, set reasonable limit
Bearish AUD Trade: HSBC Purchasing Manager Index Disappoints
Need red, five-minute candle to consider a short AUD/USD position
Carry out the same setup as the bullish aussie trade, just in the opposite direction
Potential Price Targets For The Release
Chart – Created Using FXCM Marketscope 2.0
Carves Lower High in May; Need Break & Close Below Support for Further Decline
Interim Resistance: 0.9330 (61.8% retracement) to 0.9340 (61.8% expansion)
Interim Support: 0.9200 (100.0% expansion) to 0.9220 (61.8% retracement)
Read More:
Price & Time: Gold Gearing Up For A Powerful Move
USD/JPY Tests Yearly Low as BoJ Refrains – On Cusp of Major Yen Rally?
Impact that China PMI Manufacturing has had on AUD during the last reading
Period
Data Released
Estimate
Actual
Pips Change
(1 Hour post event )
Pips Change
(End of Day post event)
APR 2014
05/06/2014 1:45 GMT
48.4
48.1
-19
+3
April 2014China HSBC PMI Manufacturing
The April Manufacturing HSBC PMI print for China came in slightly lower than market expectations and sent AUDUSD slightly lower, although the pair recovered loses by the close. Concerns continue to brew out of China in regards to the property sector and any pronounced miss in this print could impact AUD crosses to the downside, especially in the context of technicals that may have signaled a near term top in AUDUSD.
— Written by David Song, Currency Analyst and Gregory Marks
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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Source: Daily fx
