Economic Insights
China’s Manufacturing Purchasing Managers’ Index (PMI) could underperform
China’s data releases in the past few weeks showed that Consumer Price Index (CPI) was at 2.1% YoY, 1Q Gross Domestic Product (GDP) slowed to 7.7% YoY and the HSBC Flash PMI was down to 50.5. The common denominator for these three releases is they all fell short on market expectations. In reference to this data, there is a possibility the official manufacturing PMI could “follow this trend.” I forecast the actual figure to come in at around 50.1.
European Central Bank (ECB) Minimum Bid Rate and Press Conference
All eyes are on the ECB and Mario Draghi this week. I covered this in yesterday’s Market Brief of the Week. You can refer to it for my full analysis and conclusion on why the ECB will likely cut their interest rate. However, I suggest that traders exercise caution when taking positions before or during the interest rate announcement. The Forex market is traded based on expectation, and cutting the interest rate this round would just meet market expectation. How much the Euro will weaken as a knee-jerk reaction remains to be seen. More importantly, 45 minutes after the interest rate announcement, Draghi will take center stage in a press conference. Will he fire off more bullets like additional credit boosting measures, or simply cut the interest rate and hope for the best? This episode of the Euro Zone saga is definitely worth watching.
Currency & Index Insights
AUDUSD – coming resistance at 1.0350
The Aussie was at the mercy of China’s underperforming data in the past few weeks. If the actual official PMI falls short of expectation and lands around 50.1, this could give us a good chance to short the Aussie.
Although Australia’s private sector credit rose 0.2% in March, on the technical side, the AUDUSD might still find resistance around the 1.0350 level before China’s Manufacturing PMI release. The next resistance is around the 1.0400 level. The two immediate support levels are around 1.0280 and 1.0225, respectively.
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STOXX50
The Euro Zone stock index (STOXX50) rallied since the start of last week. If the ECB announces an interest rate cut in two days, this rally might head towards the level of 2753, the 2013 high.
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