It's a big day for the Aussie

The Australian dollar is preparing for a big day, with the release of key Chinese economic data and a monetary policy meeting at the Reserve Bank of Australia (RBA). AUDUSD is holding just short of a resistance zone around 0.9300 and AUDJPY is testing an important long-term resistance level around 95.70/75.

In China, the market awaits the release of March’s official Manufacturing PMI figure at 0100GMT (expected 50.1, prior 50.2), before HSBC’s releases its final March Manufacturing PMI data at 0145GMT (expected 48.1, prior 48.1). Both numbers will be scrutinised by the market as it’s very concerned about a recent deterioration in economic data out of China, including a drop in manufacturing PMI numbers. The Aussie is particularly China-sensitive due to Australia’s reliance on the world’s second largest economy as a trading partner.

However, another round is disappointing economic data out of China may not lead to a weaker Australian dollar. Recently the Aussie has typically fallen immediately after a disappointing piece of Chinese economic data, before rising on the notion that Beijing will have to do more to reinvigorate the economy. It’s a fine line between whether the Aussie rallies or falls on the back of disappointing Chinese economic data. The key thing to watch is the market’s perception of the data and what action Beijing may take.

Later today the RBA concludes its April monetary policy meeting, at which the bank is expected to keep the official cash rate at 2.5% (the monetary policy statement is due at 0330GMT). The bank has routinely expressed that the most prudent course is likely a period of stability in interest rates. However, the RBA has been uncharacteristically quiet about the recent rise in the exchange rate. The bank has previously stated that its outlook on the economy doesn’t have the Australian dollar above 90.00 US cents. With AUDUSD bouncing off a resistance zone just below 0.9300 late last week, the RBA may try and talk down the commodity currency once again. This could weigh on the AUD, as the market appears to have gotten used to the RBA not engaging in verbal intervention. (For a full rundown of today’s meeting see: RBA preview: what about the Aussie?).

Technical look: AUDJPY

AUDJPY is testing a key resistance zone around 95.70/75 at the time of writing. A close above this level could see the pair make a run for another long-term resistance zone around 97.45. However, a failure to close above this level may see the pair make a bearish double-top formation, in which case price may fall back below 95.00.

Source: FOREX.com