The start of 2016 was not an easy one for the Australian Dollar (AUD). The monthly release of China’s manufacturing data showed further contraction to their already lower activity levels; causing significant risk aversion on the financial markets as fears start to surface over the health of the Chinese economy and financial markets.
China is one of Australia’s largest trading partners, which means it has a direct impact on the Australian commodity and currency markets; meaning we are likely to see continued downward pressure on the AUD vs. all the major parings if this situation escalates.
In other news from around the Globe, New Zealand’s Global Dairy Trade (GDT) index fell 1.6% yesterday and whole milk powder prices fell 4.4%. These could be significant figures for the New Zealand economy (NZ) as 7% of New Zealand’s GDP is generated from the dairy sector. The AUDNZD market is expected to remain very range bound for this month, as the key support lines of 1.06 and 1.075 have yet to been tested or surpassed.
In the US Non-farm employment change data (NFP) will be the key to this week’s movement on the AUDUSD market.
Earlier in the week the AUD tested the US Dollar (USD) level of 0.73 cents. The market immediately rejected prices at this level after the aforementioned Chinese figures were released.
The NFP Employment figures will lead to more speculation on when the next US interest rate hike will be. If the final figure surpasses 200,000 jobs created then we should see the market favour the USD, as investors will expect interest rate hikes in the next 2-3 months in the US. Anything below the 200,000 figure we will most likely see the AUD move closer to 0.7250 in the short-term.