Australian Dollar moves little following China’s NBS PMI data
- AUD/USD remains steady following China's mixed NBS Purchasing Managers’ Index (PMI) data.
- China's August Manufacturing PMI rose to 49.8, topping expectations, while the Non-Manufacturing PMI held steady at 49.0.
- Australia's TD-MI Inflation Gauge jumped to 4.8% year-over-year in August, despite a monthly decline to 0.5%.
AUD/USD edges higher after opening at a bearish gap, remaining in the negative territory and trading around 0.7160 during the Asian hours on Monday. The currency pair holds steady as the Australian Dollar (AUD) experiences little movement following the release of China’s NBS Purchasing Managers’ Index (PMI) data. Because Australia and China share strong trade ties, shifts in economic conditions within China frequently impact the performance of the AUD.
China’s Manufacturing PMI rose to 49.8 in August, compared to 49.2 in the previous reading, China’s National Bureau of Statistics (NBS) reported on Monday. The reading came in above the market consensus of 49.7 in the reported month. The NBS Non-Manufacturing PMI steadied at 49.0 in August versus July’s 49.0 figure.
Australia’s TD-MI Inflation Gauge rose to 4.8% year-over-year in August, from 4% in July. However, the monthly reading declined to 0.5% from the previous month’s 1%.
The upside of the AUD/USD pair could be limited as the US Dollar (USD) could rebound amid hawkish remarks from Federal Reserve (Fed) Chair Kevin Warsh. Warsh said on Friday at the Jackson Hole symposium that policymakers will "have work to do" if they were not confident cost-of-living pressures were easing for Americans. “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,” said Warsh. “Otherwise, we have work to do,” he added.
Moreover, the Fed's next interest rate decision will be made on September 15-16. According to the CME FedWatch tool, markets are now pricing in nearly a 57.5% chance of at least 25 basis points (bps) next month, up from 35% before the speech.
Technical Analysis:
In the daily chart, AUD/USD trades at 0.7160, extending its advance above both the nine-day and 50-day Exponential Moving Averages (EMAs). This alignment of short- and medium-term EMAs below price hints at a firm bullish near-term bias, while the 14-day Relative Strength Index (RSI) around 63 reinforces constructive momentum without yet signaling outright overbought conditions.
On the downside, initial support emerges at the nine-day EMA near 0.7152, followed by a more substantive dynamic floor at the 50-day EMA around 0.7067. A deeper setback would turn focus to the previously established horizontal support at 0.6667, although as long as the pair holds above the clustered EMA region, buyers are likely to retain control of the daily trend.
Aussie advance slows as UOB flags fading momentum near key resistance
Strategists at UOB Group note that the recent AUD/USD upswing is losing some steam as it approaches key resistance levels. They recall that “last Thursday (19 Aug, spot at 0.7125), we highlighted that ‘while further AUD strength is not ruled out, it must first break clearly above 0.7150 before a move to 0.7175 can be expected.’” With the pair subsequently breaking “clearly above 0.7150,” UOB wrote on Monday (24 Aug, spot at 0.7165) that “AUD strength remains intact, and the level to watch is 0.7200.”
The Aussie has since risen to “a high of 0.7198,” but UOB cautions that “upward momentum is deteriorating amid negative divergence on momentum indicators.” Even so, they judge that “as long as AUD holds above 0.7160 (‘strong support’ level previously at 0.7120), there is a chance for AUD to test 0.7220 before the risk of a pullback increases.”
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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