The Australian dollar continues to slide against the greenback and tested downtrend support on its way down. Will it reach parity?
The month of September began with a long list of negative headlines from Australia and from its main trade partner China.
AUD/USD is now trading at 1.0260, having recovered from the the lows of 1.0240. Note the downtrend support line on the hourly chart. The line begins in early August and felt twice since then.
AUD USD Falling Along Downtrend Support – Click image to enlarge
During the weekend, China reported a drop in its official manufacturing PMI from 50.1 points (growth territory) to 49.2 (contraction territory). Expectations were for a smaller slide to 49.8 points.
When trading resumed, the reaction was a Sunday gap to under 1.03. From there, the fall continued on bad news:
- Australian AIG Manufacturing Index remained in contraction zone; 45.3 points. At least it is better than last month’s 40.3 points.
- Australian retail sales fell by 0.8%, far worse than a rise of 0.3% that was predicted.
- Australian ANZ Job Advertisements dropped by 2.3%, a faster drop than 0.8% last month and a bad sign for the upcoming official jobs report.
- Australian Company Operating Profits slid by 0.7%, falling short of expectations for a rise of 1.1%.
- Chinese HSBC Final Manufacturing PMI was revised to the downside, from 47.8 to 47.6 points. Note that this is lower than the official number.This is also the lowest since March 2009.
- Australian Commodity Prices fell year-over-year by 13.7%, worse than last month’s 11.1%.
In the debate concerning the mining boom, it seems that those saying that the boom is over have the upper hand.
The RBA meets to make its monthly rate decision tomorrow. The consensus is for no change: a cash rate of 3.50%. With all these news, there is a chance of a rate cut.
For more on the Aussie, see the Australian dollar.
Later in the week, we also have employment data and GDP for Q2.
