The Aussie tagged its fifth consecutive losing week last week on the back of lower gold prices and a concerned RBA. What’s in store for the comdoll this week?
China’s manufacturing PMIs
The world’s second-largest economy is back in the game after a week-long vacay!
It will heat things up for commodity-related currencies on Wednesday at 1:00 am GMT when it prints its official manufacturing and non-manufacturing PMIs for February.
The Caixin manufacturing PMI – which surveys smaller businesses unlike the official readings – is scheduled to print its report on Thursday at 1:45 am GMT.
Remember that market players are looking to see how the government’s latest financial crackdown and restrictions are affecting manufacturing activities, so make sure you stick around to see what the business owners have to say!
There are no top-tier reports scheduled from the Land Down Under this week, but we will see lower-tier reports that might influence the Aussie’s intraday trends.
The parade won’t start until Wednesday at 10:30 pm GMT when the AIG manufacturing index is released.
This will be followed by the more closely-watched quarterly private capex report (1.1% expected vs. 1.0% previous) on Thursday at 12:30 am GMT and then the annualized commodity prices report following five hours later at 5:30 am GMT.
The last of them is the HIA new home sales data scheduled on Friday at 12:00 am GMT.
Market risk sentiment
As mentioned below, the Aussie can take cues from gold prices, which was affected by overall dollar and market sentiment.
If equities, bond yields, and Greenback sentiment continue to hog the spotlight, then you might also want to base your Aussie trades on these instead of individual economic releases.
Last Week’s Price Review
The Aussie is on course to closing out as a net loser for yet another week (as of 7:00 am GMT), which will mark the fifth consecutive week of broad-based Aussie weakness.
The Aussie apparently took directional cues mainly from the slide in gold prices. And market analysts say that gold (and most other commodities for that matter) was on the backfoot this week largely because of the resurgent U.S. dollar, which made globally-traded commodities relatively more expensive and unattractive to buy (but more attractive to sell) for investors holding non-USD currencies.
However, other factors were likely in play since gold started slumping early on Tuesday but the Aussie didn’t really really follow suit and even tried to climb higher before grudgingly beginning to dip on most pairs during the late Asian session. Moreover, the Aussie’s slide didn’t become truly broad-based until Wednesday rolled around.
This was likely due to the RBA’s generally upbeat assessment and outlook for the Australian and international economy. However, another probable reason is that Aussie bears who have been short on the Aussie since the past few weeks were using the RBA minutes to cover their shorts.
The RBA did raise some concerns with the weak wage growth in Australia, though. Also, the RBA repeated its mantra that “an appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than forecast.”
And those may have been the reasons why the Aussie dipped after trying to climb higher. Although it’s also likely that the risk-off vibes and slide in gold prices were also weighing on the Aussie.
Dip demand on the Aussie was notable, though. And aside from short-covering by Aussie bears, there wasn’t really anything else and market analysts only pointed out the obvious without really offering an explanation.
Moving on, I mentioned earlier that the Aussie’s slide only became truly broad-based when Wednesday rolled around.
And while gold was in decline then, it’s also very likely that the Aussie was crushed by Australia’s Q4 construction work done report since that showed that total construction work plunged by a very painful 19.4% quarter-on-quarter, which is a much sharper drop compared to the consensus for a 9.8% slump.
Incidentally, the Aussie’s broad-based slide on Wednesday is the main reason why the Aussie is going to be a net loser yet again.