Over 40 years’ heritage
185,800 clients worldwide
Over 15,000 markets

AUD slumps on China PMI

The USD was front and centre of the moves in the FX space as it gained ground in all the major currency pairs.

AUD
Source: Bloomberg

Traders focused on the FOMC meeting minutes, which perhaps showed a switch to a modestly hawkish view. The key takeaway from the minutes was the fact the Fed sees the labour market as improving more rapidly than expected and this could lead to a revision in the ‘underutilisation’ of the labour market view.

As far as rates are concerned, the Fed feels that if the convergence of the committee’s goals happened quicker than expected, it would deem reduced policy accommodation appropriate. The market now looks ahead to Jackson Hole, with analysts split on whether Janet Yellen will maintain her dovish ways or give a much more balanced view. Should she deliver this view, the market is likely to perceive a hawkish shift. The greenback exhibited significant strength against the pound, euro and yen.

Key uptrend broken

AUD/USD has been on the back foot in Asia with losses extending on the back of HSBC China manufacturing PMI print. The reading came in at 50.3 – well below expectations of 51.5. Given China concerns have somewhat ramped up over the past few weeks, any disappointing readings are likely to stoke concerns.

AUD/USD dropped to a low of 0.9239 and is essentially retesting lows from earlier in the month. The pair has breached an uptrend support line in place since February, leaving it looking quite vulnerable. Additionally, the RSI indicates there is more room for selling in the near term. The next level I will be looking at is the 38.2% retracement of the rise from February to July, which comes in at 0.9182.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.

Find articles by analysts