There was some cheer in the markets yesterday when China reported its Purchasing Managers’ Index (PMI) figures. Numbers came in at 51.0 in August which was a 16-month high, as new orders jumped and overseas demand rebounded. This figure was slightly better than the 50.6 median estimate of 31 analysts in a Bloomberg News survey and July’s 50.3 level.
A separate manufacturing PMI released today by HSBC Holdings Plc and Markit Economics rose to 50.1 last month from 47.7 in July, the biggest gain in three years and the first reading above 50 since April.
The improvement in the manufacturing figures may bolster confidence that the economy is responding to Premier Li Keqiang’s policies to support growth amid a crackdown on shadow banking aimed at curbing financial risks. Major banks like JPMorgan, Credit Suisse and Deutsche Bank have all reflected their positive sentiment, citing strength in infrastructure, exports and real estate.
In fact, JPMorgan raised its estimate for China’s third-quarter economic growth to 7.6 percent from 7.4 percent and its projection for the final three months of the year to 7.5 percent from 7 percent. Deutsche Bank lifted its third-quarter estimate to 7.7 percent from 7.5 percent while Credit Suisse last week increased its 2013 forecast to 7.6 percent from 7.4 percent.
While things looked rosy in China, Singapore and Malaysia had less than desirable figures to report. Malaysia’s ringgit dropped the most in Asia on speculation that outflows will accelerate on prospects of a reduction in US monetary stimulus this month. The ringgit retreated 0.2 percent, the most among the 11 most-traded Asian currencies, to 3.2927 per dollar as of Monday morning 10.30am.
Not to be outdone, Singapore stocks tumbled by the most among developed markets last month as investors pulled cash from Southeast Asia at a rapid pace. The Singapore’s Straits Times Index, the benchmark gauge for the region’s biggest market, dropped 7.5 percent in the 10 days through August, its longest losing streak since 2002. The gauge slumped 6 percent in August, the worst performance among the world’s developed equity markets.The primary concern was also due to the prospect of an impending tapering of monetary stimulus by the US Federal Reserve.
This caused the Singapore dollar to fall 0.3 percent against the US dollar in August.
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Australia: Retail Sales m/m. Tuesday, 3 Sept, 9.30am
I expect figures to come in at 0.4% (previous figure was 0%).
USA: Non-Farm Payrolls. Friday, 6 Sept, 6.30pm
I expect figures to come in above 175K (previous figure was 162K).
Short AUD/USD at 0.8961
On the H1 chart, AUD/USD is having a sharp reversal after hitting a low of 0.8892. The positive PMI figures from China caused AUD/USD to open on Monday morning with a 40 pip gap. However, with the impending air strikes from US on Syria looming, I expect risk to be off the table in the coming days.
We will go short once AUD/USD falls back down to 0.8961. We will have a stop loss 40 pips above the entry price, which is a few pips above the previous high of 0.8997. We will have two targets on this trade, exiting the first position at 0.8921 and the second position at 0.8881.
Entry Price = 0.8961
Stop Loss = 0.9001
1st Profit = 0.8921
2nd Profit = 0.8881