AUDUSD Trades Within A Descending Channel on Mixed Forex News, RBA Decision Eyed
The Australian dollar pared most of its gains from October when AUDUSD closed the month 134 pips lower at 0.6756. On a daily basis, the currency pair retreated from its intraday highs at 0.6778 during the European session as risk aversion weakened demand for the Aussie. By Friday’s close, it incurred a 9-pip loss.
There was not a lot of forex news in terms on economic data last week. Concerns that a US-China trade deal may not happen this year made risk currencies like the Aussie vulnerable to market sentiment.
This week could change as it will be a busy week for both the Aussie and the US dollar.
We kicked off the roster of high-impact economic reports earlier today with building approvals from Australia. According to the Australian Bureau of Statistics, the number of building permits issued in October declined by 8.3%. This was a much bigger decline than the -1.0% market consensus.
However, data from Australia’s largest trading partner, China, topped forecasts. The Caixin manufacturing index for November came in at 51.8 versus the 51.5 forecast. This suggests that the country’s manufacturing sector continues to expand as the number is higher than the 50.0 baseline reading.
Looking at the hourly time frame, the market’s reaction to the reports were muted. AUDUSD is trading within a descending channel when you connect the highs and lows from November 21. It is currently trading around resistance at 0.6770. This area also seems to coincide with the 100 SMA.
Now, the ISM manufacturing report for November is due for release later today. At 3:00 pm GMT, the report is expected to show that while manufacturing activity in the US is still in a contraction (readings below 50.0 indicate such), conditions did improve during the month. The forecast is up at 49.2 versus the October reading at 48.3. A better-than-expected figure may propel the currency pair lower and test support at the bottom of the channel around 0.6740. On the other hand, disappointing figures may help push AUDUSD above resistance.
It’s worth mentioning that the RBA is scheduled to announce their rate statement early tomorrow at 3:30 am GMT. It’s possible that movement on AUD pairs today will be muted ahead of the release. There are no changes expected from RBA Governor Lowe. However, if he signals that recent economic reports warrant a re-assessment from the central bank to ease in the future, the Aussie could slide against its counterparts.Download our latest quarterly market outlookfor our longer-term trade ideas.
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