- Chinese manufacturing activity fell for a second month in August.
- China’s economic outlook remains uncertain.
- Falling Chinese iron ore prices are sure to hurt the Australian dollar, pushing AUD/USD lower.
Today’s AUD/USD outlook is bearish. Chinese manufacturing activity figures, which were released on Wednesday morning and showed it fell for a second month in August, did not appear to have had much of an impact on the Australian dollar.
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The National Bureau of Statistics’ Purchasing Managers’ Index (PMI) came in at 49.4, higher than Bloomberg’s consensus estimate of 49.2.
China’s manufacturing sector saw last growth in June, albeit a very modest one (50.2), marking a historically slow expansion for the world’s biggest exporter.
As central banks around the world tighten policy, the prolonged depression in output may not improve any time soon. Consumer demand should be even weaker as a result.
Recently, the People’s Bank of China (PBOC) and the central government have stepped up their encouraging actions. They also have plans to support credit development and mitigate the effects of the country’s housing problem, but those plans could be too little, too late.
Although policymakers may support lending, the negative economic effects of home lending are already affecting banks.
In addition, lower benchmark lending rates will further squeeze profit margins, requiring additional government support.
Although today’s PMI results beat expectations, traders won’t change their outlook on the Chinese economy anytime soon. Chinese iron ore prices are trading lower, which will likely hurt the Australian dollar.
AUD/USD key events today
ADP’s US National Employment Report is based on payroll information from nearly 400,000 US corporate clients and measures the monthly change in non-farm private employment. The release, which comes out two days ahead of official government data, is a reliable indicator of the nonfarm payrolls report.
AUD/USD Technical Outlook: Retest of the 30-SMA
Looking at the 4-hour chart, we see the price trading below the 30-SMA and the RSI below 50; all bears showing are under control. The bears were unable to break below the support level of 0.68513, and the price is again testing the 30-SMA.
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Bears will likely try to break below 0.68513 if the SMA holds as resistance. However, if the SMA fails to hold as resistance, the price might retest 0.69507 and 0.70006.
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