Last night, was a big night for Australian dollar macro traders. Two major China statistical releases and a monetary policy decision triggered a limited rally that respected a key technical pattern.
China MFG PMI
The first key release last night was China’s official Manufacturing Purchasing Managers Index (PMI) for the month of March. A slight improvement with a 50.3 reading, higher than the forecast of 50.1 and a point better than the prior reading of 50.2. The reaction was limited but to the downside as many expected a stronger rebound.
China HSBC/Markit MFG PMI
The big statistical miss of the night came from China’s HSBC/Markit Manufacturing PMI. The biggest decline in output since November 2011 with new orders strongly declining. The final reading came in at 48.0, which was significantly lower than the 48.5 prior reading. Aussie dollar contracted a little, but all eyes remained focus on the RBA decision.
The key move night last night was triggered by the RBA’s decision to keep the cash rate at 2.50% and signal that they will maintain interest rates steady at its current levels for a while. Initially price spiked a couple pips above the .9300 before quickly retreating back down towards 50-period SMA on the hourly chart. The respect of .9300 has tentatively confirmed a double-top pattern, which may only trigger a limited downside move as a boom in housing and expected stimulus from China may ultimately be very supportive for the Australian currency. Price on the daily chart also has formed a bearish butterfly pattern that may target a pullback towards the 23.6% retracement of the C to D leg which currently resides at .9213.
The trade: Buy AUD/USD at .9215 with a stop loss at .9150 and a take profit at .9495. The Risk/Reward Ratio is a little better than 1:4
Edward J. Moya
WorldWideMarkets Online Trading