AUDUSD Tests the Bottom of Range After losing 2 Cents

AUDUSD has been falling hard for two weeks, but last night the decline stalled ahead of the Australian manufacturing and services PMI numbers. AUD/USD turned bullish in the first half of this month, breaking above its previous range and gaining 2 cents to approach 0.68. However, sellers reemerged last week, making the Australian dollar the first to turn negative against the US dollar at the beginning of the week.

After falling back into its previous range, the pair has now surrendered the 200-pip gain it had earlier in the month. It is currently testing the lower bound of the range, marked by the red 100-day SMA. Since Australia relies heavily on exports to China for economic growth, the AUD/USD has been drifting lower for the past two weeks as traders react to China’s slower growth.

AUD/USD Chart Daily – Will the Range Break Soon?

Following last week’s slide back into the range, the AUD/USD’s decline has accelerated this week. However, it has approached crucial support against its rising 100-day moving average, which is currently at 0.66. Prices haven’t dropped below this moving average since May 2, with stop losses likely on a break below. We were anticipating buyers to lean against this moving average ahead of the Australian PMI figures for Manufacturing and Services released today.

Australia Manufacturing and Services PMI Report for June

• Flash Manufacturing PMI (July): 47.4 points
  • June Manufacturing PMI: 47.2 points
  • The Flash Manufacturing PMI for July showed a slight improvement over June’s figure, reflecting a modest upturn in manufacturing activity. However, with the index still below 50, the sector remains in contraction, indicating ongoing challenges in the manufacturing industry.
• Flash Services PMI (July): 50.8 points
  • June Services PMI: 51.2 points
  • The Flash Services PMI for July decreased from June’s level, but it remains above the neutral 50-point threshold. This suggests that while growth in the services sector has slowed slightly compared to the previous month, it is still experiencing expansion.

Comments from the report, Warren Hogan, Chief Economic Advisor at Judo Bank, in brief:

• Flash PMI report is an early read on Australia’s economy in July and probably doesn’t capture the impact of tax cuts and cost-of-living support measures on household budgets and consumer spending. This will take some time to flow through to business conditions but should be expected to provide a boost over the months ahead.
• Employment continued to soften in July, with the composite employment index just above the 50 index level.
• Official data show that most of the job creation in Australia over the past year has come from the public sector and related industries, with the so called market sector employment trends slowing rapidly in 2024
• while the demand for labour in many businesses is holding up, it’s weakest since the start of the pandemic in 2020.
• Weaker activity results are not translating into a notable fall in inflation pressures across the business community.

AUD/USD Live Chart