The Australian dollar is showing limited movement in the Friday session. In North American trade, AUD/USD is trading at 0.7039, up 0.19% on the day.
Will China PMIs accelerate?
The week wraps up with key data out of China, with the release of Manufacturing and Services PMIs for October. With China looking at Covid-19 out of a rearview mirror, economic conditions continue to improve in the world’s second-largest economy. The services sector has looked strong, as Services PMI has posted readings well into expansionary territory, above the 50-level. In September, the PMI improved to 55.9, up from 55.2 points. This marked the highest reading since 2013. The upward trend is expected to continue, as the consensus for October stands at 56.2 points.
The manufacturing sector has not been as robust as services, with PMI readings pointing to stagnation, with readings barely above the 50-level. The index came in at 51.5, up from 51.0 beforehand. The estimate for October is 51.4 points. These PMI releases could affect the movement of AUD/USD, which is down 1.3% this week. The Aussie is sensitive to key Chinese numbers, as China is Australia’s largest trade partner.
In Australia, inflation showed improvement in the third quarter, with a gain of 0.4%, which matched expectations. This marked a rebound from Q2, which showed a reading of -1.2%. This was the first decline since 2016, reflective of the severe economic downturn due to the Covid-19 pandemic. Earlier in the week, CPI rebounded in impressive fashion. Inflation in Q3 posted a gain of 1.6%, after a decline of 1.5% in the second quarter. Trimmed CPI, which excludes the most volatile items on CPI, gained 0.4% in Q3, up from -0.1% in Q2. Despite these strong numbers, AUD/USD had its worst 1-day decline since October 6th, with a drop of 1.1 per cent.
AUD/USD Technical
- There is weak resistance at 0.7068, followed by a resistance line is 0.7109
- We find support at 0.6994. Below, there is support at 0.6961
- AUD/USD broke below the 10-day MA in mid-week, a sign of a downward trend
