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- Australian Dollar holds losses following PMI data
Australian Dollar holds losses following PMI data
- The Australian Dollar declines following the soft Purchasing Managers Index data release on Monday.
- Australia Composite PMI fell to 49.9 in July from 50.2 in June, with Services PMI decreasing to 50.4 from 51.8.
- The US Dollar lost ground as recent downbeat employment data boosted expectations of a Fed rate cut in September.
The Australian Dollar (AUD) depreciates against the US Dollar (USD) following the release of downbeat Judo Bank Purchasing Managers Index (PMI) data on Monday. Additionally, the AUD receives pressure as the second-quarter inflation data has diminished expectations for another rate hike by the Reserve Bank of Australia (RBA) at its policy meeting on Tuesday.
Markets estimate an RBA rate cut in November, a move anticipated much earlier than previously forecasted for April next year. These factors are contributing to the downward pressure on the Australian Dollar and undermine the AUD/USD pair.
China's Caixin Services PMI rose to 52.1 in July, from June's 51.2 reading. The index has exceeded the market expectations of 51.4 reading. Since both nations are close trade partners, changes in the Chinese economy can significantly impact the Australian market.
The downside of the AUD/USD pair could be restrained as the US Dollar lost ground after the downbeat US labor market data released on Friday. This has boosted the expectation that the US Federal Reserve (Fed) would cut its interest rate in September.
Daily Digest Market Movers: Australian Dollar declines following the downbeat PMI
- The Judo Bank Australia Composite PMI dropped to 49.9 in July from 50.2 in June, falling below the neutral 50 mark for the first time since January. The Services PMI decreased to 50.4 in July from 51.8 in June. While this represents the sixth consecutive month of expansion in services activity, the growth rate was marginal and the slowest observed in this sequence.
- US Nonfarm Payrolls (NFP) increased by 114K in July from the previous month of 179K (revised down from 206K). This figure came in weaker than the expectation of 175K, data showed on Friday.
- US Average Hourly Earnings eased to 0.2% month-over-month in the same reported period, below the market consensus of 0.3%. On an annual basis, the figure decreased to 3.6% from the previous reading of 3.8%.
- US ISM Manufacturing Purchasing Managers Index (PMI) tumbled to an eight-month low of 46.8 in July, compared to the previous 48.5 reading and the forecasted move up to 48.8.
- China’s Caixin Manufacturing Purchasing Managers Index (PMI) posted a reading of 49.8 for July, falling short of the expected reading of 51.5 and the previous reading of 51.8.
- The Australian Bureau of Statistics (ABS) reported a trade surplus of 5,589 million for June, surpassing the anticipated 5,000 million but still below the previous reading of 5,773 million.
- During a press conference, Federal Reserve Chair Jerome Powell stated that a rate cut in September is "on the table." According to Reuters, Powell added that the central bank will closely monitor the labor market and remain vigilant for signs of a potential sharp downturn.
Technical Analysis: Australian Dollar hovers around 0.6500
The Australian Dollar trades around 0.6500 on Monday. The daily chart analysis shows that the AUD/USD pair consolidates within a descending channel, indicating a bearish bias. The 14-day Relative Strength Index (RSI) is hovering below the oversold 30 level, which suggests a potential for an upward correction.
The AUD/USD pair could find immediate support around the lower boundary of the descending channel at the throwback support of 0.6470 level.
On the upside, resistance is first encountered at the channel's upper boundary, around 0.6520, followed by the nine-day Exponential Moving Average (EMA) at 0.6544. The next significant resistance is at 0.6575, where the "throwback support turned resistance" is located. A breakout above this level could propel the AUD/USD pair toward a six-month high of 0.6798.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.03% | 0.12% | -0.94% | 0.00% | 0.20% | 0.06% | -0.45% | |
| EUR | 0.03% | 0.07% | -1.05% | -0.09% | 0.25% | -0.02% | -0.53% | |
| GBP | -0.12% | -0.07% | -1.06% | -0.13% | 0.18% | -0.09% | -0.60% | |
| JPY | 0.94% | 1.05% | 1.06% | 1.01% | 1.12% | 1.04% | 0.54% | |
| CAD | -0.01% | 0.09% | 0.13% | -1.01% | 0.23% | 0.05% | -0.64% | |
| AUD | -0.20% | -0.25% | -0.18% | -1.12% | -0.23% | -0.27% | -0.78% | |
| NZD | -0.06% | 0.02% | 0.09% | -1.04% | -0.05% | 0.27% | -0.51% | |
| CHF | 0.45% | 0.53% | 0.60% | -0.54% | 0.64% | 0.78% | 0.51% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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