By: Christopher Lewis
The Aussie dollar is without a doubt a favorite of many traders out there. In fact, it is the simplest trade quite often when there is an overall “risk on” or “risk off” attitude in the world’s various financial markets. The main reason for this is the fact that the Aussies are the suppliers of many countries when it comes to raw material, with the most notable being China.
The weekend sees the HSBC Flash Manufacturing PMI numbers coming out of China, and this number could be massively important as it shows the rate of expansion or contraction in the industrial base of China. Readings above the 50 mark indicate expansion, and sub-50 means contraction. If the number is strong, the Aussie will without a doubt act positively as it would follow that the Chinese will be buying more good from Australia to continue to produce the goods that the world needs. If it is a weak number, this would signal that the global economy is continuing to slow, and this will have a negative effect on not only the Aussie, but all risk assets in general. The expected number is 48.3 showing a decline.
200, 50% Fibonacci, and the 1.04
The 200 day exponential moving average is just above, so the resistance from the trend traders will be apparent. This is one of the hurdles that the bulls will have to overcome in order to continue the bullish tone that the pair has had over much of the last couple of years. The recent bounce is from the 50% Fibonacci level, and as a result many of the longer-term players will have gotten involved. The 1.40 handle above is also of note, and once the market gets into that handle – it would show a breakout of sorts as the 200 day EMA is below it, and the area had been support previously.
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With this in mind, I am bullish of this pair – but only if that PMI number comes out over the 50 level. The announcement will be the first of many important ones around the Forex markets for the week, and will more than likely set the tone for many markets around the world, not just this one.