FxWirePro: AUD/USD ‘Directional Hedging as Caixin PMIs and RBA likely to add momentary cushion for Aussie

Aussie dollar is cushioned to its major downtrend on two important factors. Namely, first, RBA monetary policy and Caixin manufacturing PMIs.

The Reserve Bank of Australia’s monetary policy is scheduled for this week (on April 2ndprecise). Unusually, this meeting will be on the same day as the announcement of the Federal Budget at 7:30 pm that evening. As such, we would expect that the Governor’s Statement will be fairly low key with little change from the sentiment we saw in the March meeting. 

Following the May meeting, the RBA will move to a clear easing bias as per Westpac’s projections, which would be justified by the downward revisions in the growth forecasts. 

However, it is unlikely that there will be any hints of this action in the April Governor’s Statement.

Elsewhere, Caixin Chinese Manufacturing PMI numbers post an upbeat above the neutral 50.0 flashes at 50.8. Production and total new work both increase at quicker rates. Since China is Australia’s major trade partner, it is important to track their business sentiments.

Although the number consistent with only a marginal pace of improvement, the index reading was the highest seen since July 2018. 

Manufacturing production in China rose for the second month in a row in March. Though modest, the rate of increase was the quickest seen since last August. The upturn was supported by a stronger, albeit still relatively muted, rise in total new work. Furthermore, new export orders rose slightly after a fall in February. 

Trade tips: On hedging grounds, at spot reference: 0.7130 levels, contemplating above fundamental factors, we advocate initiating longs in AUDUSD futures contracts of Apr’19 delivery as further upside risks are foreseen and simultaneously, shorts in futures of May’19 delivery for the major downtrend. Thereby, one can directionally position in their FX exposures. The directional implementation of the same trading theme by further allow for a correlation-induced discount in the options trading also if you choose strikes appropriately. Courtesy: Westpac & IHS

Currency Strength Index: FxWirePro's hourly AUD spot index is inching towards 134 levels (which is highly bullish), while hourly USD spot index was at -15 (mildly bearish), while articulating (at 08:26 GMT). These indices are also conducive for the above hedging set-up.

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex