Aussie gains after impressive manufacturing PMI from China
The Australian dollar gained after data from China showed a rebound in manufacturing activity. The data released on Sunday showed that in March, the manufacturing PMI rose to 50.5. This was better than the consensus estimates of 49.5. It was also the best number this year after contracting in the past four months. As proof of the improving sentiment, the Caixin Manufacturing PMI released today rose to 50.8. The non-manufacturing PMI rose to 54.5, which was in line with expectations. The positive manufacturing activity from China is a good way to start the second quarter because one of the biggest fears in the market this year has been the slowing global economy, led by China.
The Japanese yen declined after data from Japan showed some weakness. In the first quarter, the Tankan large manufacturers index declined to 12 from the previous 19. Similarly, the large non-manufacturers index declined to 21 from the previous 24. These numbers rate the relative level of general conditions in the two sectors and this year, they have been on a downward trajectory. The large manufacturer's index peaked in the fourth quarter of 2017 when it reached 25.
It will be a busy data-day as traders receive the PMI data from around the world. In Spain, the PMI is expected to remain at 49.5 while in Switzerland, it is expected to decline to 53.6. In Italy, it is expected to decline to 47.6 (from 47.7), while in France and Germany, the PMI is expected to remain unchanged at 49.8 and 44.7 respectively. For the UK, the PMI is expected to decline slightly to 51.2. Other important data expected today are the EU's CPI, which is expected to remain at 1.5%.
In the United States, the PMI data from the Institute of Supply Management (ISM) is expected to show that activity remained unchanged at 54.2 while that from Markit is expected to show that activity remained unchanged at 52.5. In addition, the retail sales are expected to show a slight gain of 0.3% while the core retail sales are expected to decline slightly by 0.4%.
It was a positive quarterly start by the Aussie following the positive manufacturing activity from China. The AUD/USD pair rose to a high of 0.7125, which was the highest level since Wednesday. It is now trading at the 0.7122 level, which is along the upper line of the Bollinger Bands while the RSI has moved to almost the overbought level. The price is also along an important trendline as shown below. The pair will likely continue moving upwards to test the important resistance level of 0.7150.
The USD/JPY pair rose after the weak economic numbers from Japan. It reached a high of 111.13, which was the highest level since March 20. On the hourly chart below, the pair is slightly lower than the upper line of the Bollinger Bands while the RSI has dropped slightly from the overbought level. It is also in the third phase of the impulse Elliot Wave, which is a sign that it could decline slightly to the 50% Fibonacci Retracement level before continuing the upward trend.
After the sharp declines of the past few days, the EUR/USD found support today at the 1.1230 level. On the hourly chart below, the pair is along the middle line of the Bollinger Bands while the MACD is still in the negative side. The volumes have declined, which is a sign that the downward trend could continue until the pair tests the 1.1200 level.