Australian Dollar Struggles Amid Weak PMI and RBA Uncertainty

Australian dollar struggles amid weak PMI data and RBA uncertainty. Critical support and resistance levels were analyzed.

The Australian dollar experienced a challenging start to the week as disappointing Chinese and Australian PMI data weighed heavily on the currency. Given its strong connection to the Chinese economy through commodity exports, the sluggish expansion reported in the Caixin report pointed to a less-than-robust economy. Additionally, with China observing its Golden Week, trade activities were expected to decrease, potentially limiting the upside for the Australian dollar.

Australian Dollar Struggles Amid Weak PMI and RBA Uncertainty

The Australian Manufacturing PMI remained in contractionary territory, indicating a challenging economic landscape. Furthermore, the inflation gauge showed a decline, which could alleviate some hawkish pressure on the Reserve Bank of Australia (RBA). Market expectations for an interest rate hike remained low, with a mere 9% chance priced in. Investors eagerly awaited guidance from the new RBA Governor, Michele Bullock, hoping for insights into any potential shifts in policy.

Later in the day, market attention shifted to the US ISM PMI data and Federal Reserve announcements, promising increased volatility for the AUD/USD pair.

From a technical perspective, AUD/USD revealed concerning signs in the short term. The previous week’s price action displayed a long upper wick, indicating a failed attempt by bulls to retest the psychological handle at 0.6500. The pair continued to respect the medium-term trendline resistance, and a close below this level could further dampen the Australian dollar’s prospects.

Key resistance levels remained at 0.6500, and the 50-day moving average at 0.6459. On the downside, crucial support levels included the trendline resistance at 0.6358 and 0.6272.

Market sentiment among retail traders, as reflected in IG Client Sentiment data, appeared mixed for AUD/USD. Currently, 76% of traders hold long positions. 

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