AUD/USD bulls keep 0.7400 on radars with eyes on China PMIs

  • AUD/USD seesaws around the highest since December 2018.
  • US Dollar weakness joins upbeat equities and commodities to favor the Aussie bulls.
  • Sino-American tussle gets a fewer audience and so does virus updates, US policymakers still jostling over the stimulus package.
  • China’s NBS Manufacturing PMI may drop to the lowest in six months, second-tier Aussie data also up for release.

AUD/USD is up for the fifth consecutive monthly gains while taking rounds to 0.7365 at the start of Monday’s Australian session. The pair surged to the December 2018 top on Friday after the US dollar trimmed the Fed-backed gains of the previous day. Also favoring the bulls were the strong performances of stocks and commodities, especially gold. Traders may now wait for China’s key activity numbers for fresh impulse.

Bulls keep the reins…

With the US dollar’s heavy losses dragging it back to the 27-month low, the AUD/USD prices marked a stellar run-up towards piercing the previous year’s peak. Market’s reassessment of Fed Chair’s Average Inflation Targeting (AIT) method, allowing inflation to go high past-2.0% target, joined downbeat Core PCE data to weigh on the greenback. In doing so, welcome numbers of the US Consumer Sentiment and Chicago Fed Manufacturing Index were mostly ignored.

Also pleasing the quote bulls were the north run by global equities and commodity prices. While S&P 500 refreshed the record high, gold also regained $1,965. Furthermore, the US 10-year Treasury eased 2.2 basis points (bps) to 0.72% by the end of Friday’s trading.

The coronavirus (COVID-19) numbers remained mostly static with the US, Brazil and India occupying the top spots. Recently, an American health official Dr.Fauci rekindled expectations of the early vaccine. Previously, US President Donald Trump has pushed for the pandemic’s cure.

Elsewhere, the US and China keep disliking each other with American President Trump’s latest comments suggesting an end to reliance on China.

While there have not been any key bullish fundamentals from home, the pair traders may look forward to China’s PMI data for August for fresh direction. Also in the line is Australia’s TD Securities Inflation for the current month. Forecasts suggest the key NBC Manufacturing PMI drop to 48.7 versus 51.1 whereas the Non-Manufacturing PMI may weaken to 52.1 from 54.2 prior. The manufacturing activity figures, if matching the forecasts, will mark its first contraction since February and can trigger the pair’s fresh downside.

Technical analysis

With the RSI flashing overbought signals, an ascending trend line from March 2020 and December 2018 top near 0.7400 becomes the key resistance to watch for the bulls ahead of targeting July 2018 peak surrounding 0.7485. Alternatively, the pair’s declines below the previous year’s high of 0.7296 will highlight August 19 peak near 0.7275 as support.

 

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