The Australian Dollar (AUD) experienced volatility against the US Dollar (USD) on Monday following the release of key economic data. While improved risk sentiment might help cushion the risk-sensitive AUD, dovish expectations regarding the US Federal Reserve’s (Fed) future actions are also influencing the currency‘s movement.
Australia’s Building Permits surged by 10.4% month-over-month in July, recovering sharply from a 6.5% decline in June, marking the strongest growth since May 2023. On an annual basis, the growth rate reached 14.3%, a significant rebound from the previous 3.7% decline. Additionally, China’s Caixin Manufacturing PMI increased to 50.4 in August, up from 49.8 in July, a positive development given China’s strong trade ties with Australia.
The US Dollar faced downward pressure due to growing expectations of a 25 basis point rate cut by the Fed in September. However, support for the Greenback came from the US July Personal Consumption Expenditures (PCE) Index data released on Friday.
Looking ahead, traders will closely watch the upcoming US employment data, including August’s Nonfarm Payrolls (NFP), to gauge the potential size and pace of future Fed rate cuts.
Market Movers: Australian Dollar Stabilizes After Key Economic Releases
The US Bureau of Economic Analysis reported that the headline PCE Price Index increased by 2.5% year-over-year in July, matching the previous figure but missing the estimated 2.6%. The core PCE, excluding volatile food and energy prices, rose by 2.6% year-over-year in July, consistent with the prior reading but slightly below the consensus forecast of 2.7%.
The US economy showed strength, with the Gross Domestic Product (GDP) growing at an annualized rate of 3.0% in the second quarter, surpassing expectations. Initial Jobless Claims also fell slightly to 231,000 for the week ending August 23.
In contrast, Australia’s Private Capital Expenditure unexpectedly declined by 2.2% in the second quarter, reversing a 1.9% expansion from the previous period and missing market expectations for a 1.0% increase. This marked the first contraction in new capital expenditure since the third quarter of 2023. Meanwhile, 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 market expectations.
Technical Analysis: AUD/USD Tests 0.6750 Amid Uncertain Outlook
The Australian Dollar is trading around 0.6760 against the USD on Monday. The daily chart indicates that the AUD/USD pair is positioned below an uptrend line, signaling potential weakening of the bullish bias. However, the 14-day Relative Strength Index (RSI) remains above 50, suggesting that the overall bullish trend could persist.
On the upside, the AUD/USD pair may face immediate resistance at the seven-month high of 0.6798, followed by the uptrend line around 0.6860. A break above this level could reinforce the bullish momentum, potentially pushing the pair toward the psychological level of 0.6900.
Conversely, if the pair declines, it may find support at the 14-day Exponential Moving Average (EMA) around 0.6732. A break below this EMA could increase downward pressure, with the next support levels at 0.6575 and 0.6470.
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