Hurt by weak Aussie data, AUD/USD finds respite in the upbeat China Caixin PMI

Hurt by weak Aussie data, AUD/USD finds respite in the upbeat China Caixin PMI

3 July 2017, 04:06
Roman Vashchilin

AUD/USD clocked a low of 0.7673 after the data released in Australia showed the building permits in May tanked 5.6% m/m. The drop was way bigger than the expected -1.3% print.

China Caixin PMI showed the manufacturing activity returned to expansionary territory in June. That has helped stabilize the Aussie around 0.7680 levels. The rebound in the Caixin number is good news given the survey usually focuses on small and medium sized export oriented units. Meanwhile, the government PMI (released last week) is more focused on State Owned Enterprises (SOEs), which has relatively easy access to credit.

However, it remains to be seen if the Aussie is able to cheer the expansion in the Chinese activity, given the backdrop of the horrible housing data and a Doji candle on the daily chart.

Ahead in the day, the USD traders would closely watch out for signs of labor market strength in the ISM manufacturing index.

AUD/USD Technical Levels

Failure to hold above 0.7678 (161.8% Fib ext. of May 9 low - May 23 high - June low) despite strong China data would increase the risk of a bearish follow through after Friday’s Doji candle formation. A break below 0.7667 (Fri’s low) could yield a sell-off to 0.7636 (June 14 high) and 0.76 (zero figure). The area above 0.77 handle has acted as a stiff resistance zone since Apr 2016. Friday’s Doji candle around 0.77 is thus bad news. Only a daily close above 0.7712 (Friday’s high) would open up upside towards 0.7778 (Nov 2016 high) and 0.78 (zero levels).

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