Can AUD/USD sustain its uptrend even with China printing weaker-than-expected PMI?
Here’s a trend setup I’m watching.
Before moving on, ICYMI, yesterday’s watchlist looked at EUR/AUD’s channel ahead of China’s Caixin PMI release. Be sure to check out if it’s still a valid play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
Chinese Caixin manufacturing PMI fell from 49.4 to 49.0 in December
Australian commodity prices up 15.6% y/y in Dec vs. previous 19.6% gain
ECB official Nagel says further monetary policy action needed
Asian markets mixed as traders brace for FOMC minutes, NFP
Spain unemployment dropped by 43.7K in Dec vs. previous 33.5K decline
OPEC-JMMC meetings still ongoing
Canadian manufacturing PMI at 2:30 pm GMT
U.S. final manufacturing PMI at 2:45 pm GMT
New Zealand GDT auction coming up
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! ? ?️
What to Watch: AUD/USD
The economic calendar still seems to be in holiday mode, as the coast is clear in terms of top-tier events!
Only China’s Caixin manufacturing PMI was worth watching today, with the economy reporting a dip from 49.4 to 49.0 for December. This was lower than the projected decline to 49.2, representing a sharper than expected contraction in the industry.
With that, risk-off flows came in play and weighed on the higher-yielding Aussie earlier in the day. But how long could the selloff last?
AUD/USD is trading inside an ascending channel that’s been holding since mid-December, and it looks like another test of support could be in the cards.
This lines up with the 61.8% Fibonacci retracement level and the .6750 minor psychological support. A shallow pullback might even find buyers at the 50% Fib near the 100 SMA dynamic inflection point and mid-channel area of interest.
Technical indicators are giving mixed signals, though, as the moving averages point to a continuation of the uptrend while Stochastic is moving south. Heck, I’m even seeing a bit of bearish divergence as the oscillator made lower highs!
I’d probably wait for Stochastic to pull higher from the oversold area or for reversal candlesticks to show up before hopping in a long position. Besides, the U.S. is set to print its final manufacturing PMI in a few, so any revisions might impact dollar direction, too.
