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.

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.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. 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. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.