AUD/USD: Short Term Bears Remain Despite Chinese Manufacturing Growth

The battered Aussie dollar received further blows yesterday thanks to the latest FOMC minutes which strengthened the USD. According to the minutes, most Fed members would like to see some form of tapering action in 2013 and end all stimulus effort in 2014. This would mean tighter liquidity conditions in the future, sending USD higher and AUD/USD 50 pips lower following the news released. Luckily for AUD/USD bulls, the ambiguity of the Minutes and the pricing in of tapering scenario in past few days allowed a quick bullish recovery, sending price back above the 0.904 resistance. However, bulls who did not use this opportunity to clear their long positions may regret their action a few moments later, as price ultimately failed to re-establish itself above 0.904 and is subsequently rejected by the descending trendline, pushing price back down below 0.90 to continue the strong bearish impetus.

The strength of bears can be seen via this morning’s price action. AUD/USD fell further from the 0.8965 – 0.898 consolidation region due to a lower Conference Board Leading Index which fell 0.2% compared to previous month’s figure. To see AUD/USD falling more than 20 pips on this insignificant news event suggest that bears are indeed reigning, and are looking for excuses to sell whenever they can.

Thankfully for the bulls, they received yet another lifeline in the form of stronger than expected HSBC Flash Manufacturing PMI of China. The latest PMI numbers suggest that there is slight growth in Chinese manufacturing sector, a welcome reversal of past 3 months shrinkage. However, the rally did not result in any sustainable bullish movement, with strong bears snuffing out the recovery via the same descending trendline once again, which cannot be described as unexpected considering that we’ve just seen the same happening 7 hours ago. Fool me once, shame on you. Fool me twice, shame on me. If bulls did not use this opportunity to clear/hedge their positions, they have no one else to blame if prices continue to push lower from here out.

Hourly Chart
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From a technical perspective, Stochastic readings suggest that a retest of the descending trendline may be possible as readings are signalling a fresh bullish cycle currently. However, with resistances lining up from 0.899 to 0.90, it is hard to imagine bulls able to push higher further when fundamentals and line studies do not support such a move. Even if we push up higher, 0.904 resistance will still be there with overall bearish bias remaining intact. Price would need to trade above 0.91 in order to alleviate bullish pressure, and allow for further bullish expectations to take root.

Daily Chart
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Daily Chart agrees with prices continuing the downtrend as marked by Stochastic curve in conjunction with Kumo’s rejection. Forward Kumo has also recently performed a “bearish twist”, piling on pressure and supporting a move towards 0.885 once again especially with 0.90 soft support broken. However, should 0.90 holds out, we could still see prices potentially moving up towards the overhead Kumo without impairing the long-term bear trend as long as Senkou Span A holds.

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