RBA eyed, China's manufacturing PMI revised down

Market Brief

The last 2 weeks were not easy for dollar bulls with the dollar index down 3.6% at 94.39 on April 30th, the lowest since February 26th. Finally, the greenback got some respite last Friday and even enjoyed a quiet Asian session. Japan markets are closed this morning as the Golden Week takes off, today is Greenery Day; Tokyo will also be closed tomorrow due to Children Day and Wednesday as well. Talking about holidays, UK traders are also off today due to Early May bank holiday. Expect thinner trading volume, especially today.

China’s HSBC Manufacturing PMI was revised lower to 48.9 from 49.4 (49.2 prior read). Hong Kong’s Hang Seng edges up 0.12% while the Shanghai Composite is up 0.50% to 4,463 points. In India, equity markets erased losses from last week and are back at 27,335, up 1.20% during the session. After last week’s sharp moves, USD/JPY is edging down toward 120, slightly below the 50% Fibonacci retracement level (120.18) on March sell-off.

AUD/USD is trading sideways this morning after reaching a 3-month high at 0.8076 last week. The Aussie is currently sitting on the 0.78 resistance (Fib 50% on April rise and psychological level). On the downside, the pair should find some support around 0.7741 (Fib 61.8%) and then around the 0.7550/70 area (multi lows). A resistance lies at 0.7920 (high from April 30th) and further at 0.8076 (high of April 29th). Australia’s building approval in March rose 2.8%m/m in March while analysts were looking for a contraction of -1.5%m/m. Markets expect the RBA to lower its cash rate by 25bps to 2%, while prior was revised higher from -3.2% to -1.6%. However, we think that the Royal Bank doesn’t want to add fuel to the fire as the housing market is clearly showing no sign of a cool down.

EUR/USD is down to 1.1184 this morning, consolidating slightly lower from last week high of 1.1290. The next support stands at 1.1043, previous highs from March. While on the upside, the euro will need some fresh boost to break the 1.1380 resistance (high from February 26th). We think that the current dollar weakness is temporary and traders will soon start to price in again the upcoming rate hike from the Fed. However, before increasing rates the Fed needs to see further improvements in the job market and inflation level. It’s all about data.

USD/CHF remained quiet in Asia and is trading slightly higher this morning, getting closer to the key 0.94 level. On the upside, a resistance stands around 0.9451/81 (multi highs and lows). EUR/CHF found buying interests last week and was able to take off, testing 1.0523 at the highest, amid SNB’s decision to tighten exemption rules from negative rates. The euro is consolidating around 1.0460.

Today traders will watch April Manufacturing PMI out of Eurozone (and separately from France, Spain, Italy and Germany), April SVME PMI from Switzerland, March Factory orders from the US while FOMC member William will speak tonight.