AUD/USD retains gains as Chinese manufacturing activity expands in January

Australian dollar preserved daily gains against its US counterpart on Monday, after an official report said that manufacturing activity in China, Australias largest export market, increased in January.

AUD/USD touched a session high at 0.8772 at 1:15 GMT, after which consolidation followed at 0.8760, gaining 0.09% for the day. Support was likely to be received at January 31st low and also the lowest level since July 20th 2010, 0.8694, while resistance was to be found at January 31st high, 0.8824.

According to data by the National Bureau of Statistics and China Federation of Logistics and Purchasing released on February 1st, nations manufacturing PMI came in at a reading of 50.5 in January, in consonance with experts forecasts. Values above the key level of 50.0 are indicative of expansion in the sector.

At the same time, the Australian Industry Group (AIG) reported that activity in Australian manufacturing sector continued to shrink in January, with the corresponding index falling to a reading of 46.7 from 47.6 in the preceding month.

Building approvals in the country increased by annualized pace of 21.8% in December, or below expectations of a 23.4% gain. In November the rate of increase has been revised up to 23.6% from 22.2% previously. The number of building approvals decreased for a third consecutive month in December, which implied that support to nations housing sector by record low interest rates may be losing its strength. Building approvals fell 2.9% in December compared to a month earlier, after in November they dropped by another 0.3%.

Housing market in Australia has been one of the segments of economy to show a good performance, after investment boom in nations mining sector began to fade. The central bank in the country has reduced borrowing costs eight times since November 2011 in order to facilitate the development of the housing sector and retail trade.

A separate survey by the Australia and New Zealand Banking Group (ANZ) revealed earlier on Monday that the number of job advertisements in Australia decreased 0.3% in January compared to a month ago, after in December compared to November the indicator registered a 0.8% drop.

Traders saw a 96% probability that the Reserve Bank of Australia will maintain its benchmark interest rate at the current record-low level of 2.50% at its policy meeting on Tuesday, according to swaps data compiled by Bloomberg News.

“I’m sure as much as one can be that the RBA will not be reducing rates,” said Hans Kunnen, a senior economist at St. George Bank Ltd. in Sydney, cited by Bloomberg News. “I think the text will confirm the current cycle of easing is over and that could be a positive for the Aussie.”

The yield on Australian benchmark 10-year bonds was slightly changed at 4.01%, after having fallen to 3.99% on January 31st, or the lowest level since October 30th.

Meanwhile, in the United States, the manufacturing PMI probably slowed down to a reading of 56.4 in January from 57.0 in December. The Institute for Supply Management (ISM) is expected to release the official figure at 15:00 GMT today. Better than projected readings will certainly provide support to the greenback.

Elsewhere, the Aussie was higher against the euro, with EUR/AUD cross down 0.17% on a daily basis to trade at 1.5389 at 7:56 GMT. AUD/NZD pair was trading little changed at 1.0819 at 7:56 GMT, losing 0.09%.