Majors rebounded against the greenback yesterday leading with the Canadian Dollar’s 1.1% rise as WTI oil prices rally to $50 per barrel. Manufacturing PMI data for China and US deepened the concerns on global economy. China’s HSBC Final Manufacturing PMI fell to 49.8 after the official PMI was below 50 for the first time in two and half years. US ISM manufacturing PMI was at a-year low of 53.5 missing expectations of 54.5. The European PMI data was in line with forecasts but German and French ones were lower.
Oil prices maintained a technical rally and the WTI closed at $49.57, highest close in a month. The triangular pattern has been broken after a double bottom at $43.60 last Thursday. The next upside target is $51.70 – the high of January 15.
We saw a strong bounce of CAD following the oil bounce and a dark-cloud cover – a reversal sign – left on the daily chart for the USDCAD. It implies further adjustment should occur in upcoming trading days.
Most of the focus on the news today will be the RBA decision at 14:30 AEDST with the market expecting a 25bp rate cut. The OIS market has priced a cut at this meeting to 2.25% or even further, while economists take less-dovish views that the RBA will maintain the current interest rate at 2.5%. However, after the Bank of Canada cut their rate earlier and the Reserve Bank of New Zealand shifted to neutral, the RBA is under pressure to ease and support the economy with an over 6% unemployment rate. However, as the market has priced the rate cut, the fall of Aussie Dollar is limited and bears should be aware of upside risk.
Back to stock markets, the Shanghai Composite plunged by 2.56% to 3128. The Nikkei Stock Average lost 0.66%. Australian ASX 200 rose by 0.66% to 5625. In European markets, the UK FTSE was up 0.49%, the German DAX gained 1.25% and the French CAC Index rebounded 0.51%. The US market closed in gain territory even after downbeat economic data. The S&P 500 closed 1.3% higher to 2021. The Dow jumped 1.14% to 17165, and the Nasdaq Composite Index rebounded 0.89% to 4635.
Before the RBA statement, Australian building approvals and trade balance will be at 11:30 AEDST. UK construction PMI data will be released this afternoon. U.S. factory orders will be out at 2 am AEDST.
Have a great trading day!
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