AUD/USD is testing a key resistance area after China printed its Caixin manufacturing PMI and before the rest of the world went back from their holidays.
Will we see a breakout in the next trading sessions? Or will the pair remain in a low-key downtrend?
Before moving on, ICYMI, I’ve listed the potential economic catalysts that you need to watch out for this week. Check them out before you place your first trades today!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
Over the weekend, China’s official manufacturing PMI came in at 49.0 in December (from 49.4 in November); Non-manufacturing PMI ticked higher from 50.2 to 50.4
BRC: U.K.’s food inflation slowed down from 7.7% y/y to 6.7% y/y in December, the slowest rate since June 2022, as discounters competed to attract shoppers
China’s Caixin manufacturing PMI improved from 50.7 to 50.8 in December as firmer demand helped boost output and new orders
Australia’s commodity price index rose by 2.5% m/m in December after a 4.1% m/m uptick in November
Oil prices gained ground after Iran dispatched a warship to the Red Sea following the U.S.’ destruction of three boats of Iran-backed Houthi rebels
Spain’s manufacturing PMI in December: 46.2 (47.0 forecast, 46.3 previous); “Output and new orders both fell steeply amid reports of subdued market demand”
Italy’s manufacturing PMI for December: 45.3 (44.3 forecast, 44.4 previous); “Contractions in output and new orders were largely behind the sustained downturn” for the month”
France’s final manufacturing PMI for December: 42.1 (42.0 forecast, 42.9 previous); “Declines in production, new orders and purchasing activity worsened, while factory jobs were lost for a seventh straight month”
Germany’s final manufacturing PMI for December: eight-month high of 43.3 (43.1 forecast, 42.6 previous); The survey “signaled solid and slightly accelerated decreases in both output and employment”
Eurozone’s final manufacturing PMI for December: 44.4 (44.2 forecast, 44.2 previous); “Movements in some sub-indices to suggest the worst of the industry’s slump has passed”
BTC/USD traded above $45,000 to its highest since April 2022 on bitcoin ETF approval optimism
Price Action News
Overlay of CHF vs. Major Currencies Chart by TradingView
A lack of top-tier data releases translated to risk sentiment taking on a slightly bigger role in moving the major currencies during the Asian and early European sessions.
CHF, in particular, weakened against its major counterparts after China’s stronger Caixin manufacturing PMI eased concerns from the weaker-than-expected official PMI numbers over the weekend.
For now, the safe haven is in the red across the board. It’s registering the biggest losses against AUD and GBP and is only marginally weaker against USD and JPY.
Upcoming Potential Catalysts on the Economic Calendar:
U.K.’s final manufacturing PMI at 9:30 am GMT
Canada’s manufacturing PMI at 2:30 pm GMT
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! ️
AUD/USD: 15-min
AUD/USD 15-min Forex Chart by TV
I don’t know if you noticed but AUD/USD has been poppin’ up lower highs and lower lows since hitting a resistance around the .6860 area last week.
One possible reason is that some traders took profits from the pair’s strong December uptrend before the year ended.
AUD/USD is now trading closer to .6830, which is right where we can find a falling trend line resistance. Not only that, but the pair’s current levels are also near the R1 (.6840) Pivot Point line as well as the 100 and 200 SMAs in the 15-minute time frame.We don’t have a lot of top-tier economic reports on tap during the U.S. session so risk sentiment may likely factor in the pair’s price action. Look out for traders pricing in the Fed’s December meeting minutes and traders possibly re-pricing their Fed rate cut bets.
Focus on start-of-year risk-taking or the Fed possibly cutting its interest rates this year could encourage a risk-friendly environment and push AUD/USD higher. The pair may break above its descending channel pattern and revisit inflection points like .6870 or .6900.
On the other hand, we could see cautiousness prevail ahead of this week’s potential catalysts. Escalating tensions in the Red Sea may also drive traders into buying safe havens like USD.
If today’s headlines encourage risk aversion, then AUD/USD may extend its short-term downtrend. The pair could turn lower from its trend line resistance and head for its previous lows near .6810 or the S1 (.6780) Pivot Point line.
