Sun, June 16, 2024

AUD/USD at 0.6693 Amid Weak US Data and Yield Drops

Euro and Aussie Declined. What About the U.S. Dollar?

Quick Look:

  • AUD/USD Performance: AUD strengthens to 0.6693 amid weaker US business activity and falling Treasury yields.
  • Economic Indicators: US ISM Manufacturing PMI drops to 48.7; S&P Global PMI rises to 51.3.
  • Key Influences: US Treasury yields decline by 11 basis points; USD Index drops by 0.5%.

The Australian Dollar (AUD) has shown resilience against the US Dollar (USD), currently trading at 0.6693. This uptick can be attributed to a combination of weaker US business activity and falling Treasury yields.

AUD/USD Gains 0.55% on Monday, Consolidates Tuesday

On Monday, the AUD/USD pair experienced a significant gain of 0.55%, largely driven by a decline in US economic indicators. However, during the Asian trading session on Tuesday, the currency pair remained virtually unchanged, reflecting a period of consolidation.

Recent data reveals a mixed economic outlook in the US. The ISM Manufacturing PMI index fell to 48.7 from a previous 49.2, missing the consensus estimate of 49.6, indicating a contraction in the manufacturing sector. In contrast, the S&P Global PMI showed a slight recovery, increasing to 51.3 from 50, surpassing the estimates of 50.9.

10-Year Treasury Yield Drops 11 bps to 4.392%

Several factors influence the AUD/USD pair’s movement. Weakness in US business activity has been a significant driver, compounded by a drop in US Treasury yields, with the 10-year yield falling by 11 basis points to 4.392%. Additionally, the US Dollar Index (DXY) decreased by 0.5% to 104.07, further undermining the USD. Data from the Chicago Board of Trade indicates an expected interest rate cut of 32 basis points in 2024, which also plays a crucial role.

Market participants are closely monitoring several upcoming events that could impact the AUD/USD pair. The US Nonfarm Payrolls Report is a critical indicator of US economic health. Key Australian economic data reports are also anticipated, including Company Gross Profits for Q1 2024, Business Inventories for Q1 2024, the Current Account for Q1 2024, and the Retail Sales report for April.

Expected 2024 US Rate Cut: 32 Basis Points

The AUD/USD pair’s technical chart suggests a double bottom pattern, indicating possible bullish targets of 0.6750 and 0.6800. Key levels to watch include a cycle high at 0.6714, resistance at 0.6750 and 0.6800, and support levels at 0.6700 and 0.6600.

The recent economic slowdown in the US has heightened expectations for a Fed rate cut, with odds above 50% for a September reduction. This sentiment has affected Wall Street, with the S&P 500, Nasdaq 100, and Dow Jones futures all seeing a 1% decline, though losses were pared back towards the session’s close.

Upcoming Reports: ISM Services and Nonfarm Payrolls

Key reports to watch this week include the ISM Services Report scheduled for Wednesday, which will provide insights into the services sector. The Nonfarm Payrolls Report, due on Friday, will be crucial in shaping market expectations for US economic policy.

In summary, the AUD/USD pair’s recent strength is a reflection of broader economic trends, with weaker US data and declining Treasury yields playing pivotal roles. Investors will continue to monitor upcoming data releases for further indications of market direction.

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