China PMI drives AUD gains

FX pairs got off to a subdued start to the session, with most of the major FX pairs relatively sidelined ahead the China’s HSBC manufacturing PMI reading. 

China
Source:Bloomberg

The market was expecting a small improvement to 49.7 with the reading remaining in contractionary territory. However, the outcome was actually much better than what even the most optimistic economists expected. Manufacturing bounced back into expansionary territory, coming in at 50.8 and resulting in a fairly broad based risk rally. It’s clear China’s recent stimulus efforts are paying off and this has really helped shore up sentiment. The AUD has been brought into play now and is one of the best performing currencies in the region today.     

AUD/USD has been in a tight range around the 0.9400 region for a while and now it seems it might be gearing up for a bit of a move. The pair traded through last week’s highs on the back of the data and looks like it is headed to test April highs. This level comes in at 0.9460 and will be near-term resistance as traders deliberate just how far to push the pair. Once this level is broken, naturally 0.9500 will also come into play given it was a consolidation level in the past. From there traders will then be looking to reassess longs on the pair. Data is limited on the AUD side this week and as a result focus will be on emerging markets and the USD side of the equation.  

AUD/USD
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