Australian Dollar, AUD / USD, PMI, Service Sector – Talking Points
- fundamental outlook for the Australian dollar is darkening as the services sector contracts
- poor economic portfolio could see a lackluster trading session at the end of the week.
- AUD / USD technical outlook improves, but the lower path may be difficult to break.
Asia-Pacific Forecast Friday
Asia Pacific trade started with negative economic data from Australia. country’s services sector saw growth contraction in July, while manufacturing growth slowed, according to PMI data from IHS Markit. service sector index fell to 44.2 from 56 and the manufacturing index fell to 56.8 from 58.6. Labor indicators from the PMI surveys remained positive, but the decline in business activity led to a sharp contraction in services. Australian dollar reacted calmly against the dollar. However, the currency pair is on track to post its fourth weekly loss.
Until recently, the Australian economic recovery was firing into full steam, but a new wave of Covid-19 infections, led by the Delta variant, forced lawmakers to reinstate lockdown measures. New South Wales (NSW) reported 124 cases on Thursday, up from 110 the day before. state of Victoria has also seen an increase in cases. pace is likely to lead to an extension of the restrictions. This has changed growth prospects, with blocks costing nearly AU $ 300 million a day, according to Treasurer Josh Frydenberg. Highlights of the weak retail sales figure for June the negative effects of the lockdowns on consumption.
Despite the worsening situation in Australia, stock indices in the region could rise after US stocks mostly closed higher. Upbeat corporate earnings supported overall market sentiment. However, regionalized risk trends may continue to fuel some disparities between equity benchmarks. Hong Kong’s Hang Seng Index (HSI) remains lower the following week Regulatory fears prompted exits from the mainland. Meanwhile, China’s high-tech CSI 300 index is on track to see a second weekly gain.
Elsewhere, benchmark oil indices rose overnight, extending a rally since the beginning of this week. Crude oil futures in New York rose 2.29% on Thursday. Energy traders are seeing a reduction in global supply as demand rises from the United States and Europe. An increase in weekly crude oil inventories in the United States surprised analysts, but gasoline and other fuel products have declined, supporting the outlook for demand growth. Meanwhile, China is reported to be releasing oil reserves from its strategic reserve. move is likely to aim to cool high prices, but it could also cut Chinese oil imports.
Japanese markets will be closed for a national holiday. Tokyo will officially kick off the Olympics on Friday night. Fans are prohibited from attending game events due to Covid restrictions. Thailand will report June trade data. For the rest, the economic balance is empty, which leaves operators waiting for next week. Overnight, reported the European Central Bank (ECB) its accommodative policy will remain in force. Next week, the Federal Reserve will release its decision on interest rates, as traders await guidance on curtailing the talks.
AUD / USD technical outlook:
AUD / USD has been trying to extend a bounce since the beginning of this week, as prices have fallen to a new yearly low. positive divergence in the Relative Strength Index (RSI) suggests that energy to the downside may be depleted. This view could be strengthened if the MACD line crossed the oscillator signal line, which seems likely. A break above the September high of 0.7413 could amplify the move to the upside, with the fall of the 26-day EMA as a possible test above that level. However, the long-term trend remains biased to more bearish, which could cause traders to push the sell button hard.
AUD / USD daily chart
Chart created with TradingView
TRADE RESOURCES Australian Dollar
– Written by Thomas Westwater, Analyst at DailyFX.com
To get in touch with Thomas use the comment section below or @FxWestwateren
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