Australian Dollar maintains its position with a positive sentiment after PMI data

• The Australian Dollar appreciates, possibly due to improved risk sentiment amid de-escalated tensions in the Middle East.
• Australia's Judo Bank Composite PMI signaled a swift expansion in the Australian private sector during the second quarter.
• The US Dollar remains subdued despite the elevated US Treasury yields.

The Australian Dollar (AUD) continues its upward trajectory for the second consecutive session on Tuesday, buoyed by improved risk appetite. This positive sentiment follows a relaxation of geopolitical tensions in the Middle East, as indicated by an Iranian official's statement last week, suggesting no immediate plans for retaliation against Israeli airstrikes, as reported by Reuters.

The Australian Dollar receives a slight boost following the release of Australia's Judo Bank Purchasing Managers Index (PMI) data on Tuesday. The Composite PMI surged to a 24-month high of 53.6 in April, an improvement from the previous month's 53.3. This signals a swift expansion in the Australian private sector during the second quarter, with significant growth propelled by the services sector.

The US Dollar Index (DXY), which gauges the US Dollar (USD) against six major currencies, faces pressure despite the elevated US Treasury yields. The likelihood of interest rates remaining unchanged in the June meeting has risen to 84.4%, up from the previous week's 78.7%, according to the CME FedWatch Tool. Additionally, comments from Federal Reserve officials hint at a more hawkish stance regarding the trajectory of interest rates in June.

Investors are expected to closely monitor the US S&P Global Purchasing Managers Index (PMI) on Tuesday. Market sentiment suggests anticipation of improvements in both the manufacturing and services sectors for April. On Wednesday, attention will shift to the Australian Monthly Consumer Price Index and quarterly RBA Trimmed Mean CPI data.

Daily Digest Market Movers: Australian Dollar holds ground after PMI data

• In April, Australia's Judo Bank Manufacturing PMI surged to an eight-month high of 49.9, contrasting with March's 47.3. However, the Services PMI dipped to a two-month low of 54.2, down from the previous reading of 54.4.
• The weekly ANZ-Roy Morgan Australian Consumer Confidence declined by 3.2 points to hit its lowest level this year at 80.3, compared to the previous reading of 83.5. ANZ highlighted decreases in both economic and financial subindices. Confidence waned across various housing cohorts, with renters experiencing a notable decline.
• On Tuesday, the China Securities Journal suggested that there's a possibility the People's Bank of China (PBoC) might lower the Medium-term Lending Facility (MLF) rate on May 15 to decrease funding costs. Such a move could potentially impact the Australian market, given the robust trade relationship between China and Australia.
• The People's Bank of China maintained its Loan Prime Rates (LPR) at 3.45% on Monday. The LPR serves as a crucial benchmark rate for Chinese banks when determining the interest rates for loans offered to their clients. Given the significant economic ties between China and Australia, any changes in Chinese monetary policy have the potential to impact the Australian market.
• The Chinese Ministry of Commerce has announced a new tariff on US goods. Specifically, China has imposed a duty of 43.5% on imports of propionic acid from the United States. This chemical is extensively utilized in various sectors, including food, feed, pesticides, and medical applications, as per Reuters.
• According to a Bloomberg report, Chicago Fed President Austan Goolsbee remarked on Friday that progress on inflation had "stalled," and the Federal Reserve's current restrictive monetary policy is appropriate. Meanwhile, Reuters reported that Atlanta Fed President Raphael Bostic stated that the US central bank would refrain from cutting interest rates until the end of the year.

Technical Analysis: Australian Dollar moves above the major level of 0.6450

The Australian Dollar trades around 0.6460 on Tuesday. The pair tests the pullback resistance near 0.6456. A breakthrough above this level could potentially enhance the sentiment for the pair. However, the 14-day Relative Strength Index (RSI) remains below the 50-level, indicating a bearish sentiment. Immediate support could be found at the major level of 0.6450, followed by the psychological level of 0.6400. If the latter is breached, it might exert pressure on the AUD/USD pair to revisit April’s low of 0.6362, followed by the major level of 0.6350.

On the upside, the AUD/USD pair could target the psychological level of 0.6500 and endeavor to breach into the symmetrical channel, potentially supporting a bullish sentiment. The upper boundary of the channel could pose a resistance barrier around the 0.6639 level.

AUD/USD: Daily Chart