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AUD/USD recovers from multi-month low to 0.6725 after China PMI

  • AUD/USD retraces amid the absence of any disappointment from China PMI.
  • Traders ignore WHO, China’s efforts to placate fears of coronavirus.
  • US data, risk catalysts will entertain traders.

AUD/USD rises to the intra-day high of 0.6725 during the Asian session on Friday. The data recently reacted to the key activity numbers from its largest customer China. That said, fears of coronavirus outbreak dragged the quote to four-month low during the previous day.

China’s official PMIs for January flashed mixed signals as the headline Manufacturing PMI matched the 50.00 forecast versus 50.2 prior while Non-Manufacturing PMI rose beyond 53.5 expected to 54.1. As the data doesn’t disappoint much, traders bid the pair after the release.

Read: Breaking: NBS Manufacturing PMI (Jan): 50 vs 50 expected (AUD rises slightly)

Earlier during the day, Australia’s Private Sector Credit and Producer Price Index (PPI) flashed mixed results. December month credit data grew past 2.3% and 0.1% YoY and MoM readings respectively to 2.4% and 0.2%. However, the fourth quarter (Q4) PPI matched the downbeat forecast of 1.4% YoY and 0.3% QoQ versus 1.6% and 0.4% prior readouts in that order.

Even so, coronavirus keeps the driver’s seat for the market moves. Despite the efforts of the World Health Organization (WHO) and China to placate the fears of an outbreak and economic pessimism, global markets keep favoring the risk-off. The reason could be headlines from the South China Morning Post (SCMP) and Xinhua. While SCMP mentions that the Wuhan coronavirus has now spread to all 31 regions of China, Xinhua conveys that Chinese Shandong province asks companies not to resume working before February 10.

By the press time, the US 10-year treasury yields and S&P 500 Futures consolidate losses to 1.587% and 3,292 respectively.

Moving on, the US Michigan Consumer Sentiment and Chicago PMI will be the keys to watch on the economic calendar whereas headlines from China could keep the driver’s seat.

Technical Analysis

FXStreet Analyst Ross J Burland Spots the recent break of the short-term support line and a follow-on pullback to anticipate revisit to the trendline:

AUD/USD is forming a base in an area of buy stop liquidity following a break of 0.6550 which could transpire into a bid back to the trendline. Ahead of the Chinese data, the market is steady around 0.6717, up from the lows of 0.6705 awaiting the data dump. On a positive outcome, AUD/USD can target trendline resistance and the 0.68 handle thereafter. On a disappointment, ahead of the Reserve Bank of Australia next week, then the door will be open for further punishment towards 0.6660s and Oct lows. 

 

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