Australian dollar soars on positive China manufacturing PMI data
June 1, 2020
Posted by: Analysis Team
Category: FOREX, Technical Analysis
The Australian dollar rose in the Asian session as the market reacted to positive manufacturing and services activity from China. Data from China Logistics released yesterday showed that the manufacturing PMI remained in expansion territory at 50.6. That was slightly lower than the previous 50.8. Further data from Caixin and Markit showed that the PMI expanded from the previous 49.4 to 50.7. At the same time, the Australian PMI of 44.0 was slightly better than the expected 42.8. These numbers show that business activity is improving in both Australia and China.
The price of crude oil bounced back partly because of improving business activity and because of the upcoming OPEC+ meeting. Analysts believe that the members will commit to more supply cuts even as the crude oil price rises. Traders are also optimistic about the falling rig count from the US. Data from Baker Hughes showed that rigs fell by 15 in the previous week. That was the 11th week of declines, meaning that US production is naturally slowing down.
The focus today will be on manufacturing and service PMI data from Markit. The manufacturing PMI from Germany is expected to have jumped from the previous 34.5 to 36.8. Data from the UK is expected to have improved slightly from the previous 40.6 to 40.7. Meanwhile, from the eurozone, the data is expected to have improved from 33.4 to 39.5. From the US, data from ISM is expected to show that activity improved from 41.5 to 43.0.
The EUR/USD pair rose from Friday’s low of 1.1077 to a high of 1.1137. On the four-hour chart, the price is slightly above the 50-day and 25-day EMA and is at the highest level since March. The RSI is slightly below the overbought level of 70 while the price is slightly below the 61.8% retracement level. Therefore, the upward trend may continue as bulls attempt to test this retracement at 1.1165.
The XBR/USD pair rose to an intraday high of 37.83. On the four-hour chart, the price is slightly below the 50% retracement level at 39.38. It is also slightly higher than the short and medium-term moving averages while the RSI has moved close to the overbought level. Therefore, the price will likely maintain the momentum as bulls target the next resistance at 39.38.
The AUD/USD pair rose to an intraday high of 0.6735, which was the highest it has been since February this year. On the daily chart, the price has formed a V-shaped recovery after falling to a YTD low of 0.5507. It is also slightly above the 50-day and 25-day exponential moving average while the relative vigor index has continued to rise. The pair will likely maintain the momentum as bulls approach 0.6900.