By Chiara Albanese The Australian dollar climbed overnight after an upbeat reading of China's flash manufacturing index added further evidence that the country--a major trading partner for Australia--is on track to hit its growth targets. Preliminary results from HSBC's index, a closely watched gauge of China's manufacturing activity, rose to a six-month high of 51.2 in September compared to August's final result of 50.1. Economists on average had expected a 50.9 reading. A reading above 50 indicates expansion, while anything below signals contraction. "The number from China was strong and it confirmed positive data seen in July and August. We retain the view that the government is on track to meet its growth target of 7.5% this year," said Steven Saywell, head of currencies strategy at BNP Paribas. The biggest beneficiary in the currencies market was the Australian dollar, given that Australia is China's biggest exporter of iron ore. "We like the Aussie. Our favored trade is to [buy] it against the yen," Mr. Saywell added. In Europe, as widely anticipated, German Chancellor Angela Merkel's ruling CDU/CSU party achieved a resounding victory (41.5%) in the country's federal elections, coming close to obtaining an absolute majority. Over the coming days, the Chancellor is expected to reach out to the main opposition party SPD to create a coalition government. Given that the election results were widely anticipated, the markets' reaction was limited. The euro was hardly moved from Friday's closing levels as trading resumed Monday. "Merkel's victory means little is likely to change in regard to German policy toward the euro-zone periphery. In that sense the stability of the euro against the dollar is understandable with such an outcome unlikely to greatly change the course of policy in Europe," said Derek Halpenny, a currencies strategist at Bank of Tokyo-Mitsubishi. On the data front, Markit's preliminary reading of euro-zone composite purchasing managers' index at 0800 GMT, which rose to 52.1 in September from 51.5 in August, was not sufficient to provide a boost for the euro. The consensus expectation was of a further increase to 51.7. The index showed that business activity picked up in September to its highest level in 27 months, driven by activity in the services sector, but also pointed at a sluggish performance among manufacturers, suggesting that the euro zone's unemployment levels will stay near record levels for some months. Looking ahead, in U.S. hours investors will focus on speeches by Federal Reserve participants Dennis Lockhart, William Dudley and Richard Fisher. "A plethora of Fed speakers will provide markets with further explanation for last week's Fed surprise and potential clues on potential drivers for tapering before year-end. These members will likely highlight the importance of a wider range of economic data than the unemployment rate in judging the appropriateness of slowing the pace of asset purchases," analysts at Barclays said. At 1000GMT, the euro was trading at $1.3509 against the dollar, compared with $1.3526 late Friday in New York, according to trading system EBS. The dollar was at Y98.93 against the yen, compared with Y99.31, while the euro was at Y133.75 compared with Y134.40. The pound was trading at $1.6040 against the dollar, compared with $1.6015 late Friday in New York. The Wall Street Journal Dollar Index, which tracks the dollar against a basket of currencies, was trading at 72.870, compared with 72.946 late Friday in New York. (Francis Bray contributed to this article) Rolling 24-hour chart levels: Forex spot: EUR/USD USD/JPY GBP/USD USD/CHF Spot 0951 GMT 1.3509 98.93 1.6035 0.9125 Three Day Trend Range Range Range Bearish Weekly Trend Bearish Range Bullish Bearish 200 day ma 1.3144 95.26 1.5524 0.9354 3rd Resistance 1.3600 99.67 1.6160 0.9225 2nd Resistance 1.3569 99.36 1.6113 0.9165 1st Resistance 1.3555 99.16 1.6053 0.9128 Pivot* 1.3524 99.39 1.6023 0.9106 1st Support 1.3498 98.85 1.5978 0.9080 2nd Support 1.3484 98.67 1.5920 0.9023 3rd Support 1.3435 98.55 1.5885 0.9000 Forex spot: AUD/USD Spot 0951 GMT 0.9415 Three Day Trend Bullish Weekly Trend Bullish 200 day ma 0.9674 3rd Resistance 0.9530 2nd Resistance 0.9490 1st Resistance 0.9439 Pivot* 0.9411 1st Support 0.9382 2nd Support 0.9346 3rd Support 0.9288

Source