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Australian Dollar Forecast: AUD/USD Eyes Chinese PMI as Iron Ore Surges Higher

Australian Dollar Forecast: AUD/USD Eyes Chinese PMI as Iron Ore Surges Higher

Thomas Westwater, Analyst

Australian Dollar, AUD/USD, US GDP, Iron Ore, China PMI -Talking Points

  • US GDP Q1 print beats analysts’ expectations, sending Wall Street firmly higher
  • Chinese tariff changes push iron ore prices higher, but AUD/USD fails to follow
  • AUD/USD remains in consolidative range after early-week price rally

Friday’s Asia-Pacific Outlook

Asia-Pacific equity markets look set to close out the week on an upbeat note following a Wall Street session that saw the S&P 500 index close 0.68% higher, setting a fresh all-time high. The New York trading session received a major tailwind prior to the opening bell when the advance US Q1 gross domestic product (GDP) crossed the wires. It clocked in at 6.4% on a quarter-over-quarter basis, beating the 6.1% consensus forecast.

The optimism spurred by the US GDP print is likely to carry through the weekend as economists and investors digest the figures. Despite the Federal Reserve’s dovish messages surrounding expectations of a rate hike, the GDP print appears to have improved the odds of one. According to the CME’s FedWatch Tool, the December Fed meeting has a 18.4% chance for a 25 basis point hike, up from 9.8% the day prior.

CME FedWatch

Source: cmegroup.com

Elsewhere, iron ore futures are trading over 3% higher after Beijing outlined adjustments to tariffs and taxes for select iron and steel products. The move is intended to support China’s increasing need for industrial metals while cutting domestic production. According to China’s Finance Ministry, tariffs on nearly 150 steel items will be canceled effective May 1.

The Australian Dollar typically receives a boost on higher iron ore prices – with Australia being a major exporter of the industrial metal. While AUD/USD hasn’t given a noticeable reaction thus far, the Australian Dollar may see a delayed reaction as traders assess market conditions. A possible catalyst for AUD/USD is today’s manufacturing PMI out of China, with the National Bureau of Statistics (NBS) set to report at 01:00 GMT. Analysts expect the April figure to cross the wires at 51.7. That said, a beat on Chinese manufacturing PMI may bolster iron ore prices further, and perhaps the Australian Dollar.

AUD/USD Daily Chart

AUD/USD has ranged between 0.7750 and 0.7800 this week following a swing higher from a prior area of consolidation on Monday. Breaking above the psychologically imposing 0.78 handle would likely see an acceleration higher. Alternatively, breaching below the 0.7750 level could send prices lower, with the 50-day and 100-day Simple Moving Averages set to offer possible support.

AUD/USD Daily Chart

AUDUSD chart

Chart created with TradingView

AUD/USD TRADING RESOURCES

--- Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwateron Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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