AUD/USD Price Analysis: Dollar Pares PMI-led Gains

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  • China reported an expansion in manufacturing activity after six months of contraction.
  • The US reported the first expansion in manufacturing activity in over a year and a half.
  • This week, markets will get a lot of data on the US labor market.

The AUD/USD price analysis reveals a bullish narrative as the dollar relents after a strong rally. On Monday, the dollar strengthened after an upbeat manufacturing report reduced rate cut bets in the US. However, this report came after China’s positive manufacturing figures, which strengthened the Aussie and put a floor on excessive declines in the pair.

On Sunday, China reported an expansion in manufacturing activity after six months of contraction. The purchasing managers’ index increased from 49.1 in February to 50.8 in March, beating forecasts. A value above 50 shows expansion. Consequently, it boosted the Australian dollar, which is a proxy for the yuan.

Similarly, the US reported the first expansion in manufacturing activity in over a year and a half, boosting the dollar on Monday. Increased manufacturing activity reflects a robust economy despite higher interest rates. The Fed has kept interest rates high for some time to reduce demand in the economy which drives inflation. Therefore, if demand is still high, policymakers will hesitate to start lowering interest rates. 

Last week, data on consumer sentiment, GDP and home sales came in higher than expected, highlighting a robust economy. At the same time, inflation is on a downtrend. Therefore, there is more confidence that the US will avoid a recession caused by higher interest rates. 

This week, markets will get a lot of data on the US labor market. These figures might alter the rate-cut outlook.

AUD/USD key events today

AUD/USD technical price analysis: Price escapes bullish channel, eyes new lows

AUD/USD technical price analysis
AUD/USD 4-hour chart

On the charts, the AUD/USD price has broken out of its bullish channel and might soon reach new lows. The bias is bearish as the price is making lower lows and highs below the 30-SMA. At the same time, the RSI trades in bearish territory below 50. 

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Bears broke below the channel support before retesting it and making new lows. This confirmed the channel breakout. However, the price is currently rising to retest the 0.6520 resistance level and the SMA. Given the bearish bias, it might reverse at this resistance and fall to the 0.6450 support level.

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