AUD/USD advances towards 0.6850 as focus shifts to Caixin Manufacturing PMI data

The AUD/USD pair is expected to continue its six-day winning streak after surpassing Friday’s high around 0.6821 ahead. Previously, the Aussie asset ended the week on a bullish note as investors shrugged off China’s Covid caution and poured money into the risk-sensitive assets. The US Dollar Index (DXY) broke the consolidation formed in a range of 103.37-104.57 as safe-haven assets lost their appeal.

S&P500 ended the year on a subdued note, easing 0.25% as investors showed caution on 2023 economic projections, portraying that the risk impulse is cautiously optimistic. Ambiguity in the risk profile resulted in a decline in the demand for US government bonds. The 10-year US Treasury yields sensed the strength and advanced to 3.88%.

Going forward, the Australian Dollar will likely dance to the tunes of Caixin Manufacturing PMI data for December. Per the consensus, the economic data is expected to drop marginally to 49.3 from the prior release of 49.4.

Last week, official China Manufacturing PMI data dropped to 47.0 vs. the expectations of 49.2 and the former release of 48.0. The scale of economic activities witnessed a sheer fall as households remained busy in protest to support the rollback of Covid-19 restrictions by the Chinese administration. It is worth noting that Australia is China's leading trading partner, and a decline in the extent of China’s manufacturing activities impacts the Australian Dollar.

On the United States front, investors will focus on the S&P Manufacturing PMI data. According to the estimates, the economic data is seen as stable at 46.2.