The Australian dollar paired with the US currency is firmly fixed above the 60th figure and has been testing the resistance level of 0.6170 for the past three days (the average line of the Bollinger Bands indicator on the daily chart). The aussie ignores the strengthening of the greenback – despite the dollar index's growth, the AUD/USD pair holds its positions and persistently besieges the above-mentioned price target.
Buyers of the pair are guided by the news flow from China, while ignoring the general pessimism about the prospects for the world economy. Although more recently, the situation was mirrored: news from China provoked a general excitement around the US currency, plunging the Australian dollar to 18-year lows, namely, to the 0.5510 level. However, the situation quickly stabilized: China was able to extinguish the outbreak of the epidemic in a relatively short time, and the AUD/USD pair was able to quickly return above the strategically important 0.6000 mark. And if the pair's bulls can overcome the resistance level of 0.6170, they will open their way to the next price barrier – 0.6270 (the Kijun-sen line on the weekly chart).
AUD/USD buyers are testing this target for the third consecutive day. In particular, the pair's bulls received support from Chinese data yesterday: contrary to pessimistic forecasts, the PMI index for the Chinese manufacturing sector exceeded the key 50-point mark and reached 52 points. And this is despite the fact that this indicator collapsed to 35 points in February. According to the general expectations of experts, the indicator should have recovered to only 44 points. The index of activity in the non-manufacturing sector showed similar dynamics – after a record decline to 29 points, it jumped to 52.3 points (with a forecast of growth to 42).
These figures reflect recent trends. According to the Ministry of Industry and Information Technology of Chia, 98.6% of the country's industrial enterprises have already resumed their work after the quarantine. In particular, in Hubei province (where, in fact, the virus spread around the world), 95% of industrial giants resumed work. 76% of small and medium-sized businesses have also started production. The Ministry also clarified that about 80% of workers in the steel and electronics industries have gone to work. Industrial production has also recovered in other provinces that previously had strict quarantine restrictions. In general, according to experts, in the previous month (that is, in March), the state of the Chinese market improved: industrial activity is recovering, stocks are declining, demand is growing, and prices began to gradually increase. The financial world immediately reacted to these trends. In particular, US investment funds have begun to acquire both individual shares of Chinese companies and shares in specialized exchange-traded funds, which in turn are invested in the most successful and reliable Chinese assets. Similar decisions are made by investors from other countries of the world.
This news stream supports the aussie, since China is the main trading partner of Australia. That is why, despite the devastating impact of the coronavirus on the national economy of Australia, the aussie keeps its position.
But in the medium term, the fundamental background for the AUD/USD pair will be determined not by Chinese news, but by US events. In particular, the ADP report on the increase in the number of employed in the US will be published today. It is important first of all in the context of the upcoming NonFarms, which will be published the day after tomorrow – on Friday. As for today's release, the forecasts are disappointing – according to ADP specialists, the number of employees in March decreased by 125,000. This result will become a multi-year anti-record, and will undoubtedly put pressure on the US currency, thus supporting the AUD/USD bulls.In addition, the US manufacturing index ISM is set to be published today. It was below the key 50-point level for a long time (from August to December 2019), reflecting the deterioration of the situation in this area. However, it exceeded this important level in January and February, showing positive dynamics. To the disappointment of dollar bulls, the index will plunge again in March – according to preliminary forecasts, it will reach the level of 46 points. Here it is worth noting that on Monday, a devastating indicator was published in the sphere of production – the production activity of the Federal Reserve Bank of Dallas fell to a record low (-70 points). If today's indicator comes out weaker than the unsatisfactory forecasts, the dollar may come under significant pressure.
Thus, the AUD/USD pair retains the potential for further growth. Long positions with a medium-term upward target at 0.6270 should be considered after the bulls break through and consolidate above 0.6170, which corresponds to the average line of the Bollinger Bands indicator on the daily chart.
