The Australian Dollar (AUD) edged lower against the US Dollar (USD) on Tuesday, as traders await the release of the ISM Manufacturing PMI data. Despite this decline, the AUD/USD pair may find some support due to growing dovish expectations surrounding the US Federal Reserve’s (Fed) policy outlook.
Market participants are closely monitoring Australia’s Q2 Gross Domestic Product (GDP) and July Trade Balance data, as well as an upcoming speech by Reserve Bank of Australia (RBA) Governor Michele Bullock later this week, to gain further insight into the central bank‘s monetary policy stance.
The US Dollar has strengthened as Treasury yields rise, but potential gains may be constrained by expectations of a 25 basis point rate cut by the Fed in September. Traders are particularly focused on the August Nonfarm Payrolls (NFP) report for clues on the timing and magnitude of potential Fed rate cuts.
Market Updates: Australian Dollar Faces Pressure Despite RBA’s Hawkish Stance
Australia’s Building Permits surged by 10.4% month-over-month in July, rebounding sharply from a 6.5% decline in June and marking the strongest growth since May 2023. On an annual basis, the growth rate reached 14.3%, a notable recovery from the previous 3.7% decline.
China’s Caixin Manufacturing PMI increased to 50.4 in August, up from 49.8 in July, highlighting positive economic activity in China, a key trading partner for Australia.
The US Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) Price Index rose by 2.5% year-over-year in July, matching the previous reading but falling short of the forecasted 2.6%. The core PCE, which excludes food and energy prices, rose by 2.6%, consistent with prior figures but slightly below the consensus estimate of 2.7%.
US GDP grew at an annualized rate of 3.0% in the second quarter, surpassing both expectations and the previous growth rate of 2.8%. Initial Jobless Claims also decreased to 231,000 for the week ending August 23, slightly below the anticipated 232,000.
In Australia, Private Capital Expenditure unexpectedly declined by 2.2% in Q2, reversing from a revised 1.9% expansion in the previous period and missing market expectations of a 1.0% increase. This marks the first contraction in new capital expenditure since Q3 2023.
Australia’s Monthly Consumer Price Index (CPI) increased by 3.5% year-on-year in July, down from June’s 3.8% but slightly above the market consensus of 3.4%. This marks the lowest CPI figure since March, despite the slight decrease.
Federal Reserve Atlanta President Raphael Bostic indicated last week that it might be “time to move” on rate cuts due to cooling inflation and a higher-than-expected unemployment rate. FXStreet’s FedTracker rated Bostic’s comments as neutral with a score of 5.6.
Technical Analysis: AUD/USD Holds Above 0.6750
The Australian Dollar was trading around 0.6780 on Tuesday. Technical analysis of the daily chart reveals that the AUD/USD pair remains above the nine-day Exponential Moving Average (EMA), suggesting a short-term bullish trend. The 14-day Relative Strength Index (RSI) also remains above 50, reinforcing the overall bullish sentiment.
Resistance is seen at the seven-month high of 0.6798. A breakout above this level could extend the bullish momentum, potentially pushing the pair toward the psychological level of 0.6900.
On the downside, immediate support is at the nine-day EMA around 0.6767, followed by the 14-day EMA at 0.6743. A decline below these levels could weaken the bullish bias and increase downward pressure, potentially driving the pair toward the throwback level at 0.6575, with further support at 0.6470.
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