After China’s mixed NBS Purchasing Managers’ Index results, AUD/USD is still stable. China’s August Manufacturing PMI increased to 49.8, exceeding expectations, whereas the Non-Manufacturing PMI remained unchanged at 49.0. Australia’s TD-MI Inflation Gauge increased to 4.8% year-over-year in August, even as it experienced a monthly decrease to 0.5%. AUD/USD edges higher following a bearish gap at the opening, yet it continues to linger in negative territory, trading around 0.7160 during the Asian hours on Monday. The currency pair remains stable as the Australian Dollar experiences minimal fluctuations in the wake of the release of China’s NBS Purchasing Managers’ Index data. Given the robust trade relationship between Australia and China, fluctuations in China’s economic landscape often have a significant influence on the performance of the AUD.
China’s Manufacturing PMI increased to 49.8 in August, up from 49.2 in the prior reading, as reported by China’s National Bureau of Statistics on Monday. The reading exceeded the market consensus of 49.7 for the reported month. The NBS Non-Manufacturing PMI remained unchanged at 49.0 in August, consistent with July’s 49.0 figure. Australia’s TD-MI Inflation Gauge increased to 4.8% year-over-year in August, up from 4% in July. However, the monthly reading decreased to 0.5% from the prior month’s 1%. The potential for appreciation in the AUD/USD pair may be constrained, as the US Dollar could experience a resurgence following hawkish comments from Federal Reserve Chair Kevin Warsh. Warsh stated on Friday at the Jackson Hole symposium that policymakers will “have work to do” if they are not assured that cost-of-living pressures are alleviating for Americans. “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,” stated Warsh. “Otherwise, we have work to do,” he added.
Moreover, the Federal Reserve’s forthcoming decision regarding interest rates is scheduled for September 15-16. According to the CME FedWatch tool, markets are currently assigning a probability of approximately 57.5% for a minimum increase of 25 basis points in the upcoming month, a rise from the previous 35% prior to the speech. In the daily chart, AUD/USD is currently positioned at 0.7160, continuing its upward trajectory above both the nine-day and 50-day Exponential Moving Averages. This alignment of short- and medium-term EMAs below price suggests a strong bullish bias in the near term, while the 14-day Relative Strength Index around 63 supports positive momentum without indicating 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 shift attention to the previously established horizontal support at 0.6667.
However, as long as the pair remains above the clustered EMA region, buyers are likely to maintain control of the daily trend. 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.”
