The Australian dollar initially traded lower to start the week despite China’s government official manufacturing PMI reading for September showing its second straight month of expansion and matching a 23-month high. The official release occurred on Friday night after all the markets were closed. Price action was limited as both Australian and Chinese markets are observing a bank holiday on Monday.
The non-manufacturing (Services) PMI also remained in expansion territory with a 53.7 reading. Economists are still concerned that economic growth will continue to rely on government spending and that the overheating housing market continue to pose risks to the economy..
The Australian dollar daily chart displays that the bullish recovery may have ended on August 10th after price made its first major lower high. Since then, we have now seen two more lower highs and continued tests of both the 50- and 100-day SMAs. If we see price have a daily close below the 50-day SMA, which currently trades around the psychological .7600 handle, we could see a major leg lower target the .7450 region. If bearishness persists, key support will come from a potential bullish Gartley pattern at .7268.
To the upside, the .7700 region remains critical resistance.
The trade: Sell AUD/USD at .7690, with a stop loss at .7740 and take profit at .7590. The risk/reward ratio is 1:2