AUD/USD pays no heed to China PMI release, yield differential finds the floor

• AUD/USD unmoved by the China Caixin PMI release
• 10Y AU-US yield spread decline appears to have stalled

AUD/USD pair has hardly moved following the release of China Caixin PMI with downside reportedly being capped by a slight uptick in the 10-year AU-US yield spread.

At the present time, the currency pair is trading flat lined at 0.7656; having clocked a high/low of 0.7662/0.7648, respectively.

China Caixin manufacturing PMI, which surveys the small and medium sized export oriented units, showed the pace of expansion in the activity in October remained unchanged as expected at 51.00. The details reveal that the sub-index for output fell for the third straight month and was well below the average seen in the first ten months of the year. Meanwhile, growth in new orders picked up.

The mixed report did little to move the AUD. Moreover, the downside in the pair is being capped by a slight improvement in the benchmark yield differential. The 10-year AU-US spread/differential has moved higher to 32.2 basis points (bps) from the previous day's level of 30.7 bps.

Looking ahead - The focus remains on the yield differential.  The demand for the US dollars could be influenced by the tone of the FOMC statement due for release at 18:00 GMT.

AUD/USD Technical Outlook

Jim Langlands from FX Charts writes, " Trading from the short side remains favored, looking for another run towards the last Friday’s lows of 0.7625 and eventually towards 0.7570. On the topside, the neckline of the head/shoulder formation combined with the 100 DMA to halt any move above 0.7700. This looks unlikely to be visited again today and I would be surprised to see the pair trade much above 0.7670. Sell AudUsd @ 0.7670. SL @ 0.7710, TP @ 0.7575

• AUD/USD analysis: Aussie selling stalled, but risk remains towards the downside