This week, we recommend paying attention to the Australian dollar. At the Asian session on Monday, the pair is recovering moderately after last Friday it updated its 10-year low at 0.6432.
Local support for the Australian currency is provided by published macroeconomic statistics from Australia, while the US dollar remains under pressure from a potential easing of US monetary policy. Thus, Australia's PMI in the manufacturing sector from Commonwealth Bank in February rose from 49.6 to 50.2 points with a growth forecast of only 49.8 points. At the same time, the PMI in the manufacturing sector from AiG fell in February from 45.4 to 44.3 points. The inflation data from TD Securities also turned out to be negative. In February, prices fell 0.1% mom after rising 0.3% mom in January. The general macroeconomic background still signals the likelihood of further deterioration in the Australian macroeconomic environment. Market participants believe that at a meeting on March 3, the Reserve Bank of Australia will reduce its key interest rate by 25 basis points, from 0.75% to 0.5%. In addition, the regulator may go for another rate cut in April. These measures are necessary to mitigate the effects of the projected economic decline caused by forest fires and the coronavirus epidemic.
Poor data from China may also put pressure on AUDUSD, indicating the negative consequences of the spread of viral infection in China and beyond. According to previously published data, the Caixin PMI in production fell sharply in February from 51.1 to 40.3 points, which turned out to be worse than market expectations of 45.7 points. Given that China is Australia’s main trading partner, the recession of the former will inevitably lead to similar problems for Australia. Considering the above, we recommend that you keep the priority for “short” positions on the AUDUSD pair.
AUDUSD SellLimit 0.6590 TP 0.6410 SL 0.6640
Artem Deev, Head of Analytical Department, AMarkets