Australian dollar improves after strong economic data

• The Australian dollar gained after strong economic data on Wednesday.
• Retail sales in Australia rose 0.6% on a monthly basis in May, beating expectations for a 0.2% rise and the previous 0.1% gain.
• Federal Reserve Chair Jerome Powell wants to see more evidence before cutting interest rates.

The Australian dollar extended gains for a second day on Wednesday, boosted by the Australian Purchasing Managers’ Index (PMI) from the Godot Bank, which showed a slight improvement in June.

Retail sales in Australia, a measure of consumer spending in the country, rose 0.6% on the month in May, compared with a 0.1% gain in the previous month. The figure beat market expectations for a 0.2% increase.

The AUD/USD pair is also receiving support from the weakness in the US dollar, which is likely due to the decline in US Treasury yields. Traders will be looking for further guidance from the US ADP employment change, the Institute for Supply Management’s services PMI for June, and the US CPI. Federal Open Market Committee Meeting Minutesall of which are scheduled to be released later on Wednesday.

Daily Market Movers Summary: Aussie Dollar Rises on Higher PMI

• The Judo Bank Services Purchasing Managers’ Index (PMI) for Australia rose to 51.2 on a monthly basis, compared with 51.0 in the previous month, beating expectations of a decline to 50.6. Meanwhile, the Composite PMI rose to 50.7 on a monthly basis, compared with 50.6 in the previous month.
• China’s services sector purchasing managers’ index (PMI) fell to 51.2 in June from 54.0 in May, according to the latest data released by Caixin on Wednesday. Market expectations were for a reading of 53.4 for the period.
• Federal Reserve Chairman Jerome Powell turned slightly hawkish on Tuesday. Powell said the Fed is back on a contractionary path. However, Powell wants to see more evidence before cutting interest rates as the U.S. economy and labor market remain strong, according to Reuters.
• The minutes of the Reserve Bank of Australia’s June monetary policy meeting, released on Tuesday, noted that “the Board considered the case for holding interest rates steady was stronger than for raising them.” The Board stressed the need to remain vigilant on upside risks to inflation, noting that data suggested an upside risk to the May CPI.
• The Reserve Bank of Australia’s commodity price index fell 4.1% year-on-year in June, following a 6.0% decline in the previous month. The June decline marked the lowest rate of contraction in 16 consecutive months.
• The Melbourne Institute’s monthly inflation gauge has heightened concerns about the possibility of the Reserve Bank of Australia raising interest rates again in August. The gauge rose 0.3% in June, keeping pace with May, marking the fourth straight month of increases and remaining at its highest level since January.
• On Tuesday, Securities Daily, a Chinese state media outlet, quoted the chief economist at Citic Securities as saying that the People’s Bank of China may consider measures such as cutting the reserve requirement ratio to inject liquidity into the market. Any potential economic shift in China could have a significant impact on the Australian dollar, given the close trade ties between the two countries.

Technical Analysis: AUDUSD Holds Steady Above 0.6650

The Australian dollar is trading around the 0.6670 level on Wednesday. The daily chart analysis shows a symmetrical triangle, which represents a pause in the trend as traders reach equilibrium. However, once the price decisively breaks out of the triangle, it indicates a clear trend. However, the 14-day Relative Strength Index (RSI) is slightly above the 50 level, indicating a bullish bias.

The AUD/USD pair is likely to test the upper boundary of the symmetrical triangle at around 0.6680, followed by the psychological level of 0.6700. Additional resistance is at 0.6714, the highest level since January.

On the downside, australian dollar/us dollar The pair may find key support around the lower boundary of the symmetrical triangle at 0.6630, followed by the 50-day exponential moving average (EMA) at 0.6625.

AUD/USD: Daily Chart