When is China's Caixin Manufacturing PMI and how could it affect the AUD/USD?

China Caixin Manufacturing PMI overview

Having witnessed sluggish prints of China’s official Manufacturing Purchasing Managers’ Index (PMI) during Thursday, markets brace for Caixin Manufacturing PMI, up for publishing at 01:45 GMT on Friday, in order to determine near-term trade direction of the AUD/USD pair.

While downbeat data at home and abroad challenges the Aussie, US-China receding trade optimism highlights the importance of any incoming statistics ahead of the next week’s Reserve Bank of Australia (RBA) meeting. Macro consensus favors the private activity gauge to decline to 51.00 versus 51.40 during the month of October.

Westpac also follows the market consensus while saying,

The Oct Caixin-sponsored manufacturing PMI is due at 12:45 pm Syd/9:45 am local, expected around 51. Yesterday’s NBS measures showed declines in both the manufacturing and non-manufacturing measures.

On the other hand, analysts TD securities say,

We look for the Caixin manufacturing PMI to remain at 51.4 in October, unchanged from the previous month. This index is composed of mainly small to medium-sized companies and those that are more export-orientated. As such these companies will benefit from targeted easing measures, easing liquidity conditions and hopes of the signing of the "Phase 1" trade deal between the US and China.

Receding US-China trade optimism headlines risk during pre-RBA week session

Today’s data doesn’t carry much importance only because China is the major customer to Australia but also because of recently downbeat print from the official activity gauge and receding optimism concerning the US-China trade deal in play ahead of the next week’s RBA meeting. While China’s diplomats doubt any strong trade ties with the United States (US) beyond the “Phase One” deal, Westpac anticipates no change in next week’s RBA’s monetary policy as it says, “There is little chance that the Board will decide to cut the cash rate at that meeting.

Westpac confirms its forecast which was “refreshed” on July 24 that the Board would cut the rate by 25 basis points at the October meeting (done) and the February meeting in 2020. Markets are pricing in a probability of a minuscule 4% for a November move.”

How could it affect the AUD/USD?

Given the market pessimism surrounding Aussie, a confirmation of manufacturing weakness in the world’s largest industrial play, also Australia’s biggest customer, could drag the AUD/USD pair towards a two-week-old rising support line around 0.6853. However, pair’s further declines will have 0.6800 as the key support. Alternatively, a sustained break beyond July 10 low of 0.6910 could trigger fresh run-up to 0.6960 and 0.7000 resistances.

Key Notes

AUD/USD: On the back foot amid broad risk-off, China PMI in focus ahead of US NFP

AUD/USD Forecast: rejected from a critical resistance

About the China Caixin PMI

The Caixin China Manufacturing PMI™ is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 private manufacturing sector companies.