AUD/USD edges higher after opening at a bearish gap, remaining in the negative territory and trading around 0.7160 during the Asian hours on Monday. The currency pair holds steady as the Australian Dollar (AUD) experiences little movement following the release of China‘s NBS Purchasing Managers’ Index (PMI) data. Because Australia and China share strong trade ties, shifts in economic conditions within China frequently impact the performance of the AUD.
China‘s Manufacturing PMI rose to 49.8 in August, compared to 49.2 in the previous reading, China’s National Bureau of Statistics (NBS) reported on Monday. The reading came in above the market consensus of 49.7 in the reported month. The NBS Non-Manufacturing PMI steadied at 49.0 in August versus Julys 49.0 figure.
Australia‘s TD-MI Inflation Gauge rose to 4.8% year-over-year in August, from 4% in July. However, the monthly reading declined to 0.5% from the previous month’s 1%.
The upside of the AUD/USD pair could be limited as the US Dollar (USD) could rebound amid hawkish remarks from Federal Reserve (Fed) Chair Kevin Warsh. Warsh said on Friday at the Jackson Hole symposium that policymakers will “have work to do” if they were not confident cost-of-living pressures were easing for Americans. “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,” said Warsh. “Otherwise, we have work to do,” he added.
Moreover, the Feds next interest rate decision will be made on September 15-16. According to the CME FedWatch tool, markets are now pricing in nearly a 57.5% chance of at least 25 basis points (bps) next month, up from 35% before the speech.
Technical Analysis:
In the daily chart, AUD/USD trades at 0.7160, extending its advance above both the nine-day and 50-day Exponential Moving Averages (EMAs). This alignment of short- and medium-term EMAs below price hints at a firm bullish near-term bias, while the 14-day Relative Strength Index (RSI) around 63 reinforces constructive momentum without yet signaling outright overbought conditions.
On the downside, initial support emerges at the nine-day EMA near 0.7152, followed by a more substantive dynamic floor at the 50-day EMA around 0.7067. A deeper setback would turn focus to the previously established horizontal support at 0.6667, although as long as the pair holds above the clustered EMA region, buyers are likely to retain control of the daily trend.
Aussie advance slows as UOB flags fading momentum near key resistance
Strategists at UOB Group note that the recent AUD/USD upswing is losing some steam as it approaches key resistance levels. They recall that “last Thursday (19 Aug, spot at 0.7125), we highlighted that ‘while further AUD strength is not ruled out, it must first break clearly above 0.7150 before a move to 0.7175 can be expected.’” With the pair subsequently breaking “clearly above 0.7150,” UOB wrote on Monday (24 Aug, spot at 0.7165) that “AUD strength remains intact, and the level to watch is 0.7200.”
The Aussie has since risen to “a high of 0.7198,” but UOB cautions that “upward momentum is deteriorating amid negative divergence on momentum indicators.” Even so, they judge that “as long as AUD holds above 0.7160 (‘strong support’ level previously at 0.7120), there is a chance for AUD to test 0.7220 before the risk of a pullback increases.”