03/09/24

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The Australian Dollar (AUD) has seen a marginal decline against the US Dollar (USD) as investors await key data from the ISM Manufacturing PMI, set for release on Tuesday. Despite a recent upswing in market sentiment and a generally dovish outlook regarding the US Federal Reserve’s monetary policy, the AUD’s slide may be capped by supportive risk appetite among traders.

In the coming days, market participants will have their eyes on several critical economic indicators, including Australia’s second-quarter Gross Domestic Product (GDP) and the July Trade Balance figures. Additionally, this week will feature a speech by the Governor of the Reserve Bank of Australia (RBA), Michele Bullock, which could offer valuable clues about the central bank’s approach to monetary policy in light of the latest economic data.

On the other side of the Pacific, the US Dollar has gained ground, bolstered by rising Treasury yields. However, expectations around a potential 25 basis point rate cut by the Fed could mitigate these gains. There is a growing focus on labor market data, particularly the upcoming August Nonfarm Payrolls report, which may influence speculation regarding the timing and magnitude of any future interest rate cuts.

Further highlights include Australia’s Building Permits, which jumped 10.4% month-over-month in July, rebounding sharply from a 6.5% decline in June. This marks the highest growth rate since May 2023. In China, another significant economic partner for Australia, the Caixin Manufacturing PMI improved to 50.4 in August from 49.8 in July, reflecting positive developments in the regional economy.

Despite these positive signals, Australia’s Private Capital Expenditure unexpectedly fell by 2.2% in the second quarter, defying forecasts for a 1.0% gain. Conversely, the monthly Consumer Price Index in Australia showed a year-on-year rise of 3.5% in July, down from 3.8% in June but still exceeding market predictions.

In terms of technical positioning, the AUD is trading around 0.6780, remaining above its nine-day Exponential Moving Average, which implies a short-term bullish trend. Should the AUD/USD pair breach the seven-month high of 0.6798, it could attract further bullish momentum and push towards 0.6900. Conversely, immediate support may be found near the nine-day EMA at 0.6767, with additional levels of support positioned at 0.6743. A move beneath these levels could indicate a weakening bullish trend, potentially leading to lower support levels at 0.6575 and 0.6470.