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China PMI May Give Aussie A Fundamental Boost This Week

Posted by WorldWideMarkets . on Oct 23, 2013 2:45:00 AM

There may be a few fundamental reasons for aussie strength at least this week though the word of caution is that it has now been overbought since October 11 against the dollar and better to lose some potential profit than everything you may have made in the recent run.

The first reason is the flash China PMI reading for October that is slated for Thursday, with the expectation for 50.4 vs. 51.2 as the final reading for September. With the Australian economy so heavily dependent on China and its demand for raw material exports, any growth in China is likely to be perceived as a bonus at least until the next data point.

The second factor is more anecdotal but there seems more sentiment to the Reserve Bank of Australia keeping rates as is for longer than anticipated even if they maintain an easing bias. The probability of the benchmark rate staying unchanged at 2.5 percent at the November 5 meeting is 90.33 percent. There was never too much doubt about what the RBA would do at this meeting but next year investors were seeing the RBA as cutting rates. If the China PMI implies growth it may be enough for some investors to keep the aussie bid.

Bid at least until more investors decide to take money off the table than those who decide to keep it bid. The aussie outlook is still weak going out past the immediate future. trading aussie


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