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Global macro overview for 01/06/2017

Global macro overview for 01/06/2017:

An abrupt contraction of activity among small industrial companies in China puts the pressure on markets. The Chinese Caixin PMI index fell to 49.6 points and it was below 50 points for the first time in 11 months (reading above means expansion of the sector). This came as a surprise as yesterday (governmental) PMI for large companies sustained April's level at 51.2, a decent growth rate of activity. Prior to the latest drop, China's manufacturing sector remained in an expansion cycle for ten straight months. The data showed only a small rise in a production output and new orders amid a renewed drop in input prices and output charges. The sub-indices of output and new business weakened to their lowest level since last June. Moreover, employment fell at the fastest pace since September.

In conclusion, the debate over how much government data can be trusted is not new and the data may be a reason to worry that the Middle East is a worse condition than the statistics shows. China's manufacturing sector has come under pressure and it might be an early sign of the beginning of a slowdown. The currencies with the greatest ties to the Chinese economy, like AUD and CAD, will be affected the most by the slowdown and might drop even further if the situation gets worse.

Let's now take a look at the AUD/USD technical picture on the H4 time frame. The price is trading just above the golden channel upper boundary after a false breakout towards the level of 0.7515. There is still a room for a further downside move. The next support is seen at the level of 0.7388 and then at the level of 0.7328.

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The material has been provided by InstaForex Company - www.instaforex.com