AUD/USD: On the back foot amid broad risk-off, China PMI in focus ahead of US NFP

  • AUD/USD fails to cheer USD weakness as trade worries, downbeat China data questions Aussie buyers.
  • Australia’s AIG Performance of Manufacturing Index and CBA/Markit Manufacturing PMI flash sluggish data.
  • AU PPI and China’s Caixin PMI are nearby to follow.

Unlike other Antipodeans, AUD/USD fails to cheer the greenback weakness as broad risk-off pulls the quote back from fresh three-month high to 0.6892 by the press time of early Friday morning in Asia.

Even if the third consecutive rate cut by the United States (US) Federal Reserve (Fed) helped the Aussie to initially rise towards fresh high since late-July, prices dropped amid increasing odds of a fresh trade war between the US and China. Recently worsening the risk sentiment could be North Korea’s other test-firing of arms. Adding to the pair’s weakness was the global run for easy money policy and China’s sluggish activity numbers.

The US-China trade sentiment faded with the Chinese diplomats doubting any strong ties with the Trump administration beyond the phase one deal.

Due to this, the US 10-year Treasury yields dropped a whopping seven basis points to 1.68% while Wall Street also witnessed negative impact of trade worries.

On the data front, Australia’s strong Building Permits fail to conquer the downbeat official Purchasing Managers Index (PMI) data from China. The latest AiG Manufacturing Performance Index and Commonwealth Bank (CBA)/Markit Manufacturing PMI for October fails to restore investor confidence while lagging the priors of 54.7 and 50.1 to 51.6 and 50.0 respectively.

Markets are now gearing up for Australia’s (AU) third quarter (Q3) Producer Price Index (PPI) ahead of China’s Caixin Manufacturing PMI. While AU PPI is expected to weaken to 0.3% from 0.4% on QoQ, Chinese private manufacturing activity gauge may also drop to 51.0 from 51.4.

“We look for the Caixin manufacturing PMI to remain at 51.4 in October, unchanged from the previous month. This index is composed of mainly small to medium-sized companies and those that are more export-orientated. As such these companies will benefit from targeted easing measures, easing liquidity conditions and hopes of signing of the "Phase 1" trade deal between the US and China,” says TD Securities. On the other hand, Westpac says, “Westpac confirms its forecast which was “refreshed” on July 24 that the Board would cut the rate by 25 basis points at the October meeting (done) and the February meeting in 2020. Markets are pricing in a probability of a minuscule 4% for a November move.”

After the AU/China data, investors will keep eyes on the US monthly employment numbers in order to ascertain the chances of any pullback in the greenback.

Technical Analysis

Pair’s failure to rise much past-July 10 low of 0.6910, coupled with overbought conditions of 14-bar Relative Strength Index (RSI) triggers the pullback. However, a two-week-old rising trend line around 0.6850 seems to be the key for sellers to watch.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Feed news

Latest Forex News

Editors’ Picks

GBP/USD catches fresh bids, regains1.3400 ahead of UK PMIs

GBP/USD sees a fresh leg higher in early European trading, as the bulls take out the 1.34 handle amid growing optimism over a speedy and soft Brexit. The focus remains on the UK Markit Preliminary PMIs ahead of BOE.


EUR/USD: Inverted hammer on D1, flash PMIs eyed

EUR/USD created a bearish inverted hammer candle on Friday, establishing 1.12 as key resistance. A bearish hammer reversal would be confirmed if the spot closes Monday below 1.1102. Better-than-expected German PMI is needed to avoid a bearish close.


Week Ahead – Phase-one trade deal and UK election aftermath

The US dollar remains at a critical juncture as Fed policy will be on hold for the foreseeable future and as we start to see an economic rebound come out of Europe. The world’s largest and strongest economy is likely to start to see economic growth slow in the fourth quarter.

Read more

Gold: Flatlined after the biggest weekly gain since September

Gold is lacking a clear directional bias in Asia, having eked out its biggest weekly gain in nearly three months. The yellow metal is currently trading at $1,474 per Oz, representing little or no change on the day.

Gold News

USD/JPY clings to modest gains, just below mid-109.00s

The USD/JPY pair edged higher on the first day of a new trading week, albeit lacked any strong follow-through and remained well within the previous session's trading range.