Australian Dollar holds despite weak Chinese PMIs

• AUD/USD trades near 0.7020 after retreating from fresh multi-week highs around 0.7045.
• China's official Manufacturing and Non-Manufacturing PMIs missed expectations, weighing on the China-sensitive Australian Dollar.
• Dallas Fed President Logan reiterated that inflation remains above target.

AUD/USD trades around the 0.7020 area during Friday's American session. The pair remains under mild pressure as disappointing Chinese business activity data offsets stronger Australian inflation expectations, while renewed hawkish comments from Federal Reserve (Fed) officials provide fresh support for the US Dollar.

China's National Bureau of Statistics reported that the Manufacturing PMI fell to 49.2 in July from 50.3 previously, well below the 50.0 consensus and back into contraction territory. Meanwhile, the Non-Manufacturing PMI eased to 49.0 from 50.2, also missing expectations. The weaker readings reinforced concerns over slowing demand in Australia's largest trading partner, limiting demand for the Australian Dollar.

On the domestic front, Australia's Producer Price Index (PPI) accelerated to 3.6% YoY in the second quarter from 3.0% previously, suggesting pipeline inflation pressure remains elevated. However, the stronger inflation reading was insufficient to offset the negative impact from China and the stronger US Dollar.

The Greenback also found support after Dallas Fed President Lorie Logan struck a notably hawkish tone. Logan said monetary policy is not restraining the economy, warned that inflation is not on track to return to the Fed's 2% target, and argued that risks to inflation remain skewed to the upside. She added that she would have preferred a 25-basis-point rate increase, noting that modest tightening now could reduce the need for more aggressive action later.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.7025, holding a mild bullish bias as it pivots around horizontal support at this same level while remaining above the 20-period and 100-period Simple Moving Averages (SMAs) clustered just under 0.7000. This positioning suggests buyers retain control in the near term, and the Relative Strength Index (RSI) near 63 points to firm but not extreme upside momentum, indicating that any dips toward the underlying averages could attract renewed demand.

On the topside, initial resistance emerges at 0.7039, with a subsequent barrier at 0.7045, where a break would open the door to a more sustained advance. On the downside, immediate support is defined by the 0.7025 pivot, followed by a horizontal floor at 0.6992, while the 20-period SMA around 0.6982 and the 100-period SMA near 0.6980 form a secondary demand zone that should limit deeper pullbacks if the broader constructive tone is to persist.

(The technical analysis of this story was written with the help of an AI tool. Know more.)