Aussie rebounding in an overnight trade

Tuesday, Jan 05 2016

There were no data releases from Australia this morning. On Monday the Aussie’s decline came after the release of the Caixin/Markit China manufacturing index on Monday that showed that China’s factory activity contracted for a 10th straight month in December. The Caixin/Markit China Manufacturing Purchasing Managers' Index (PMI) showed that China's factory activity contracted for the 10th straight month in December, and at a sharper pace than in November.

With no major data releases scheduled for the Asian region, all eyes will yet again be on the performance of Chinese markets on Tuesday. The Aussie, seen as a proxy to the outlook for the Chinese economy, was not immune, losing substantial ground against safe haven plays such as the US dollar, Swiss franc and Japanese yen. "The data provided bears with another reason to sell the Aussie, as a tentative revival took a step back in December," said Sean Callow, foreign-exchange strategist in Sydney at Westpac Banking Corp.

"For now, we can only hope that China's industrial slowdown is stabilizing, since an actual recovery still appears to be over the horizon. There is definitely broad USD strength." Also, on Monday China cut the yuan's value against the greenback, making it weaker than 6.5 for the first time in more than 4-and-a-half years, with pressure mounting on the world's No. 2 economy from a growth slowdown.

Aussie is currently being traded around 0.72 area. Pair is likely to find support around 0.7150 handle and resistance above 0.7250 level. There will be no major data releases in the rest of the session.

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