The Aussie fell versus the greenback as the Chinese manufacturing sector decline increased. The reported number of the indicator of 47.8 was worse than the previous relevant reading for July, which was 49.3. Indicator value above 50 signs expansion, and vice versa, indicator value below 50 signs contraction. China is significant consumer of Australian resources for the past decade, during which the economy of China expanded exponentially to the third economy in the world. Certainly eventual continuation of Eurozone and Chinese slowdown will cause serious difficulties for Australia and will hurt the business climate significantly. The Aussie is very sensitive to interest rate rumors and changes and Friday’s RBA Governor Stevens speech should be watched very closely as it could provide some insight on what are the future intentions of the Australian Central Bank. The country’s economy is extremely sensitive to global turmoil as it mainly exports commodities, which explains the high fragility of the Australian dollar during periods of global uncertainty.
Technically, the pair is trading in a wide and long trading range during the current month and neither the bulls have enough strength to continue the surge towards new highs, nor the bears can turn the sideways correction into a downtrend. The price broke out of a channel on 21 August, but immediately reversed back to test the previous local minimum at 10 pips above the psychological level of 1.04. Then it went to break above the failed channel breakout, passed it with 20 pips but again the bulls failed. This gives us enough reasons to think that a new test of 1.0410 is underway. This may take some time, since the price is currently touching the broken channel’s upper line. Binary traders should be aware that this line could act as a support, but until a clear reversal pattern develops, the market will keep a bearish short term momentum while trading below the nearest resistance at 1.0530-50.
The information in this analysis is collected from different sources and should serve for informative purposes only. The author shall not be held responsible for the validity of the presented information. No part of this analysis recommends the purchase or sale of a currency pair or any other financial instrument.