Aussie Turns Corner as Positive Momentum Accelerates

The AUD/USD seems to have turned the corner as US yields drifted back down from overnight highs after weaker China PMI, though markets have been on low liquidity for the New Year’s Eve session. The weaker than expected jobless, helped erode the greenback, which has seen robust strength during the latter part of 2-14/

China’s final HSBC manufacturing PMI index fell to 49.6 in December from 50.0 in November compared to the flash reading which was 49.5. This is the lowest reading since 49.4 in May. After rising to 51.7 in July, the index has only been hovering slightly above the 50 expansion-contraction line, and the December print could an ominous sign of stagnating growth heading into 2015. The internals were mixed. Output rose to 49.9 from 49.6, but remains in contractionary territory. New orders declined to the lowest level since April.

U.S. initial jobless claims rose 17k to 298k in the week ended December 27, from 281k previously. The four week moving average inched up to 290.75k from 290.5k. Continuing claims fell 53k to 2,353k in the week ended December 20 from a revised 2,406k. The BLS said there was nothing unusual in the data, but claims are subject to a lot of distortions during the holidays.

After moving into oversold territory with an RSI below 30, the AUD/USD was able to hold support near the 10-day moving average at 0.8135, and is poised to test resistance near 0.8359. A rising RSI is a positive sign and the current print near 37, is still on the lower end of the neutral range. The MACD (moving average converge divergence) index generated a buy signal as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal.

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