On Wednesday, the Australian Dollar (AUD) retraced its recent gains despite encouraging preliminary Purchasing Managers Index (PMI) data released by Judo Bank and S&P Global. Meanwhile, the US Dollar (USD) maintained stability despite a decrease in the 2-year United States (US) bond yield.
Australia’s PMI data for January showed a positive shift in business activity across all sectors. The Manufacturing PMI improved from 47.6 to 50.3, signaling growth, while the Services PMI increased from 47.1 to 47.9. The Composite PMI also saw an uptick, reaching 48.1 compared to December’s 46.9. The AUD/USD pair, however, declined, with Australian shares setting a third consecutive record high attributed to increased performance in miners and energy stocks.
The US Dollar Index (DXY) remained stable due to persistent buying interest driven by risk aversion sentiment amid escalated geopolitical tensions in the Middle East. US military strikes on facilities used by Iranian-backed groups in Iraq heightened the risk-off atmosphere.
Traders are awaiting the release of the S&P Global Purchasing Managers Index data from the United States, anticipated to provide crucial insights into business activities and influence market sentiments regarding the Federal Reserve’s (Fed) interest rate trajectory.
Despite reduced likelihood of a Fed rate cut in March, money market futures indicate full pricing in of a 25 basis point (bps) cut by May, with a 50% probability of a more substantial 50 bps cut.
Daily Digest Market Movers: Australian Dollar Declines Despite Improved PMI
Australia’s Westpac Leading Index (MoM) declined by 0.03% in December, contrasting with November’s growth of 0.07%.
National Australia Bank’s Business Conditions dipped to a reading of 7 in December from the previous 9, while Business Confidence improved to -1 from -9.
Australia’s Consumer Inflation Expectations held steady at 4.5% in January.
Chair of Australia’s sovereign wealth fund, Peter Costello, notes early signs of inflation moderation but emphasizes a considerable distance to cover to align with the RBA‘s target band.
The People’s Bank of China maintains its Loan Prime Rate steady for both one-year and five-year terms at 3.45% and 4.20%, respectively.
The US Conference Board reports a slight improvement in the Leading Economic Index for December, moving from -0.5% in November to -0.1% in December, surpassing expectations.
Preliminary US Michigan Consumer Sentiment Index rises to 78.8 in January from 69.7, exceeding the expected figure of 70.
Technical Analysis: Australian Dollar Hovers Below Psychological Level at 0.6600
On Wednesday, the Australian Dollar traded around 0.6580, with immediate resistance at the psychological level of 0.6600 aligned with the nine-day Exponential Moving Average (EMA) at 0.6603 and the 23.6% Fibonacci retracement level at 0.6606. A breakthrough above this resistance could push the pair towards the major barrier at 0.6650, followed by the 38.2% Fibonacci retracement at 0.6657.
On the downside, the AUD/USD pair might revisit the weekly low at 0.6551, aligned with the major level at 0.6550. A break below the latter could lead to a retest of the monthly low at 0.6524.
