• Little momentum between trend-line, near-term SMA.
  • 200-day SMA continues to challenge bulls while 14,190/85 seems strong support.

Even if short-term descending trend-line portrays the USD/IDR pair’s weakness, 50-day SMA questions sellers as the quote cling to 14,275 during the early Asian session on Monday.

That said, a downside break of 14,260/55 area comprising 50-day simple moving average (SMA) can fetch the quote to 14,190/85 support confluence including 100-day SMA and 61.8% Fibonacci retracement of February to April upside.

In a case where bears keep dragging prices to south past-14,185, 14,100 and an upward sloping trend-line connecting lows since February at 14050 may become their favorites.

Meanwhile, 14,350 and immediate resistance-line at 14,380 can restrict the pair’s short-term upside, a break of which can propel the quote towards 14,445 and 200-day SMA level of 14,470.

Should there be sustained rise beyond 14,470, 14,550, 14,620 and 14,665 may flash on the bulls’ radar.

USD/IDR daily chart

Trend: Pullback expected

The news is crossing the wires via the New York Times that the US President Trump has decided against imposing tariffs on Australia.

Some of Trump's top trade advisers had urged the tariffs in response to a surge in Australian aluminum flowing into the market over the past year. The President, however, shot down the idea after fierce opposition from military officials and the State Department.

The news seems to have strengthened the bid tone around the Aussie dollar. The AUD/USD pair has added more than 10 pips in the last few pips and is currently trading at 0.6942.

China Caixin Manufacturing PMI overview

Early Monday at 01:45 GMT will see China's Caixin Manufacturing Purchasing Managers Index (PMI), which markets are forecasting to clock in at 50.00, a bit lower than the previous readout of 50.2. Given the side effects of the US-China trade affair and disappointments from China’s official NBS manufacturing PMI, Aussie traders will be extra-cautious of any dovetailing data coming out of China.

How could it affect the AUD/USD?

The AUD/USD pair is recovering on the daily candles thanks to the overall weakness of the US Dollar (USD). However, Aussie gains are under pressure from the pessimism surrounding the trade environment between the US and China. It should also be noted that the sluggish prints of NBS manufacturing PMI already has questioned Aussie buyers and may recall latest lows around 0.6860 with 0.6900 being immediate support if data disappoints. Meanwhile, an overwhelmingly positive result can help the quote to cross 0.6950 immediate resistance and run up towards 0.7000 and 50-day simple moving average (SMA) level of 0.7025.

Key Notes

AUD/USD traders await China’s Caixin PMI while observing trade woes

AUD/USD Analysis: neutral despite China and ahead of the RBA

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.

  • WTI stabilising following heavy bleeding.
  • WTI is currently trading at 52.98 and has travelled between a high of $53.41 and a low of $52.16bbls.

Oil prices have plummeted to a key technical level on the charts, ending just a stone throw away from the 200 W EMA target at 52.40. Another dollar lower, the price will have exceeded the 38.20% Fibo of the Dec lows to recent highs at $51.64. WTI is down nearly 17% since the start of May.

Global demand is seen to be falling, and while we awit the outcome of OPEC with respect to supply cuts, Iran is taking up the noise space and contributing to the slide of oil prices. It was reported recently that Iranian President Hassan Rouhani’s expression of willingness to negotiate with the U.S and U.S. Secretary of State Mike Pompeo's response, “We’re prepared to engage in a conversation with no preconditions,” he said. “But the American effort to fundamentally reverse the malign activity of the Islamic Republic, this revolutionary force, is going to continue.” Iranian Foreign Minister Mohammad Javad Zarif said, “Threats against Iran never work." “Never threaten an Iranian, try respect, that may work.” What’s more, he said, the U.S. can’t be relied on to keep its word. “People think twice before they talk to the United States because they know that what they agree to today may not hold tomorrow,” Zarif said.

WTI levels

Technically, the price was a stone throw away from the 200 W EMA target at 52.40 and ended just ahead of the 38.20% Fibo at 51.64 which has a confluence with 11th Feb major swing lows as an additional downside key target at 51.26. However, the 53 handle looks to be a congested area on the historical chart and a pullback might be expected at this juncture and the trend is stretched on a lower time frame. The 56.30s come as a 50% mean reversion of Friday's sell-off. However, weekly stochastics remain bearish and the price is now well into a reversal of the Dec. commencing rising channel that ended on 22nd May.

  • US dollar takes a hit in risk off markets.
  • Mexico risk, U.S. and Chinese data in focus.

Forex on Friday traded in response to President Trump's unexpected tariff threat to Mexico which was announced in early Asia sending Us stocks down sharply and making for a risk-off theme across financial and commodity markets. U.S. yields played havoc on the dollar as investors started to factor in rate cuts for the second half of the year. The DXY ended Friday 97.73 and is bleeding to a fresh low of 97.61 while U.S. ten-year yields dropped from 2.18% to 2.13% – (the lowest since September 2017).

As for data, U.S. personal incomes and spending both rose more than expected in April and the core PCE inflation gauge posted a modest rebound in April rising 0.25%; "that follows a tepid +0.03%, +0.04% and +0.05% in Jan, Feb and March respectively, providing some early support for the Fed’s view that recent low inflation has been transitory," analysts at Westpac argued.

As for the Mexico risk, the Trump administration has underlined their demands since the initial Tweet from Trump and Mexico’s president on Saturday hinted his country could tighten migration controls to defuse the threat to impose tariffs on Mexican goods. Mexico’s president said he expected “good results” from talks planned in Washington next week – which should be risk-positive, but judging by the stock index futures performances today on the open, investors are staying with the risk-off theme, likely taking a heed of warning from last week's Chinese economic data still, whereby China’s official manufacturing PMI fell to 49.4 indicating that activity is contracting.

Currency's performances

  • EUR/USD climbed from 1.1130 to 1.1170.
  • GBP/USD firmed up within a volatile trade to 1.2644 from a cent lower.
  • USD/JPY dropped from 109.00 to 108.28 for a five-month low – (The yen was the best performer on the day).
  • AUD climbed from 0.6905 to 0.6935/40, despite the risk-off mood and the RBA this week.
  • NZD also rose, from 0.6495 to 0.6547.
  • AUD/NZD dropped from 1.0630 to 1.0600.

Key notes from Wall Street

Wall Street closes in the red following a series of bearish inputs

  • Political pessimism remains on the spotlight ahead of the US President’s visit.
  • Manufacturing PMI could also entertain momentum traders.

Despite looming political pessimism at the UK, GBP/USD is taking the rounds near 1.2635 during the early Asian session on Monday.

Alike rest of the major currencies, the British Pound (GBP) also took advantage of the greenback weakness on Friday when it recovered from the 21-week low.

The recovery seems to remain intact, though with less strength, during early-day trading as investors hold a bearish bias for the US Dollar amid latest negatives from China indicating top-tier companies from the US to be on the dragon nation’s blacklist.

Market sentiment was also affected as investors await details of the US President Donald Trump’s visit to Britain while May month manufacturing purchasing manager index (PMI) from the UK and the US can add on analysts’ burden.

President Trump is likely to follow the latest rise of Brexit party’s popularity by suggesting Nigel Farage should lead Brexit talks with the EU. He may also threaten the UK for its decision to allow Huawei for 5G networks and can offer more suggestion to solve Brexit.

At the data front, the UK manufacturing PMI may soften to 52.4 from 53.1 but its counterpart from US ISM could cross the previous readout of 52.8 with 53.3.

Technical Analysis

Not only 1.2560 and 1.2500 but 1.2480 and the current year’s low near 1.2430 could also question bear’s additional rule amid oversold conditions of 14-day relative strength index (RSI).

On the flipside, 1.2710 and 21-day simple moving average (SMA) near 1.2775 may limit the quote’s near-term advances ahead of pushing buyers to confront April month low near 1.2865.

  • Failure to cross nearby resistance zone portrays pair’s weakness.
  • Oversold RSI conditions question bears.

Although AUD/JPY clings to 75.00 amid oversold levels of 14-day relative strength index (RSI) on early Monday, sustained trading beneath immediate important resistances indicates the quote’s weakness.

Among the resistances, 75.30/40 region comprising lows marked during the current month before Friday seems of higher importance as a break of which can trigger the pair’s recovery towards 21-day simple moving average (SMA) near 76.00.

Should there be additional upside past 76.00, 76.40 and 77.00 might flash on buyers’ radar to target.

In a case where the sellers refrain from respecting oversold RSI conditions, 74.55/50 area seems crucial to watch as it encompasses lows marked during July 2016 and 61.8% Fibonacci retracement level of January to April 2019 upside.

If at all bears keep dominating past-74.50, the year 2016 bottom around 72.40 can offer an intermediate halt to likely price plunge towards January month low near 70.70.

AUD/JPY daily chart

Trend: Bearish