The Australian Dollar (AUD) experienced depreciation as investors adopted a cautious stance ahead of the release of the ISM Manufacturing PMI on Monday. During the early stages of the Asian session, AUD found support following a 3.75% increase in the minimum wage in Australia, aligning closely with market projections ranging from 3.5% to 4.0%. Additionally, the AUD/USD pair strengthened following the release of US Personal Consumption Expenditure (PCE) data, indicating a moderation in price pressures in April. Furthermore, Australia’s monthly inflation rate surged to 3.6%, heightening speculation that the Reserve Bank of Australia (RBA) may consider another interest rate hike.
Despite these positive developments, the Australian Dollar faced headwinds from lower-than-expected NBS PMI data from China on Friday, dampening import demand for Australia, a key commodity producer. The close trade ties between Australia and China amplify the impact of shifts in the Chinese economy on the Australian market.
Meanwhile, the US Dollar (USD) saw marginal gains as US Treasury yields improved, reflecting a risk-averse sentiment among investors. The Greenback’s trajectory may face challenges, as Federal Reserve (Fed) officials hinted last week that the central bank could achieve its 2% annual inflation target without further interest rate adjustments. Market participants are eagerly anticipating the release of the US Nonfarm Payrolls report later in the week.
In other market movements, Australia’s Judo Bank Manufacturing PMI in May edged up slightly to 49.7 from 49.6 in April, marking the fourth consecutive month of declining conditions in the manufacturing sector. Conversely, the Caixin China Manufacturing PMI for May surpassed expectations, rising to 51.7, while the NBS PMI data showed a decline in manufacturing activity.
Technical analysis indicates a bullish bias for the AUD/USD pair, with the currency trading around 0.6660 on Monday. The pair’s upward movement from the lower boundary of a rising wedge pattern is supported by the 14-day Relative Strength Index (RSI) positioned above the 50 level. Key resistance levels include 0.6700 and 0.6714, while immediate support lies at 0.6624 and 0.6600. Further downside could lead to a test of the throwback support region at 0.6470.
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