Australian Dollar, AUD/USD, PMI, China, Energy, Technical Outlook – TALKING POINTS
- Asia-Pacific sentiment on shaky ground after US stocks fell for the fourth session
- China’s Caixin PMI data is in focus to round out the country’s earlier NBS PMI
- AUD/USD falls below a key level of support that underpinned prices in mid-August
Thursday’s Asia-Pacific Outlook
US stocks fell in overnight trading, with the Dow Jones Industrial Average leading major stock indexes into the red, falling 0.88%. The Nasdaq-100 Index (NDX) fell 0.57%, while the small-cap Russell 2000 shed 0.62%. The risk-sensitive Australian Dollar is lower after the Ai Group Australian PMI for August crossed the wires this morning. The index fell into contraction, printing a 49.3 reading.
China continues to fight the Covid-19 virus. The city of Guangzhou in the south enacted fresh restrictions on Wednesday, joining a wave of new measures across the country. The lockdowns may complicate economic activity. Wednesday’s PMI data from the National Bureau of Statistics (NBS) showed the manufacturing sector remains in contraction. Caixin is set to release its PMI data today at 01:45 GMT. The private firm focuses on smaller and medium-sized firms compared to NBS data, which tracks larger factories. This should offer traders a broader picture of China’s economy.
EUR/USD moved higher, bringing the rate further above parity as European energy prices fell. Rate traders have upped their bets on the European Central Bank’s next meeting, with overnight index swaps showing a 76% chance for a 75-basis point rate hike. The aggressive shift helped to support European bond yields, offering the Euro a much-needed tailwind.
Europe’s energy outlook has improved, bolstering the case for a higher EUR/USD. Germany’s 1-year forward energy prices reflect that optimism. According to GIE-AGSI data on August 29, EU storage is 80.17% full. That is up from 70.31% at the beginning of August. EU policymakers see gas storage lasting around 90 days, assuming normal winter conditions.
Notable Events for September 01:
Japan – Capital Spending YoY (Q2)
South Korea – Exports YoY (Aug)
Australia – Home Loans MoM (July)
China – Caixin Manufacturing PMI (AUG)
AUD/USD Technical Outlook
AUD/USD tracked lower and looks ready to extend those losses. The Chinese PMI data did not do the Australian Dollar any favors. The 61.8% Fibonacci retracement, a level that offered support multiple times throughout August, was breached. A declining MACD and RSI put the currency pair at a disadvantage. And with little nearby support on the chart, prices look poised to move lower.
AUD/USD Daily Chart
Chart created with: TradingView:
— Written by Thomas Westwater, Analyst for DailyFX.com
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