- AUD disappoints despite China’s stimulus efforts
- Equity markets cautious ahead of NFP
- DXY on make-or-break level at 103.500
The Australian dollar (AUD) is trading lower today, despite positive news from China. China’s Caixin Manufacturing PMI printed back above expansion to 51, and the People’s Bank of China (PBoC) announced that it will cut its reserve requirements ratio (RRR) to 4% from 6% from the 15th of September.
These were both positive drivers for the AUD, but the currency is still trading lower.
There are a few possible explanations for the AUD’s weakness. One possibility is that markets are still pricing in a lot of bad news for China. Another possibility is that investors are taking profits after the recent rally in the AUD. Finally, it is also possible that the AUD is simply being dragged down by the broader weakness in risk assets.
Despite the AUD’s weakness today, we continue to think that the currency offers value at the current levels. The AUD is still trading below its fair value, and we believe that the currency is likely to rebound in the near future.
NFP and ISM MFg PMI
The main focus for the markets today will be the US Non-Farm Payrolls (NFP) report and the Institute for Supply Management (ISM) Manufacturing PMI. The NFP report is expected to show that the US economy added 200,000 jobs in August, while the ISM Manufacturing PMI is expected to come in at 59.0.
A miss in either of these reports could be a bearish catalyst for the USD, which could help to boost the AUD. However, if both reports come in as expected, or even beat expectations, the USD is likely to remain strong, which could put pressure on the AUD.
Our preferred pairs to trade with a miss in NFP today are AUDUSD (upside on a miss) and USDJPY (downside on a miss).
This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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