- AUD/USD opens Asia lower following Chinese data that disappointed.
- Likely scenario is a continued decline, particularly if the pair loses the 0.6700 level.
On the day that both US and Chinese tariffs kick in as a reminded of the recently escalated trade war, AUD/USD has started the week on the back foot. AUD/USD was opening in early Asia -0.14% to a low of 0.6723 from a high of 0.6726 following a spike in USD/CNH and mixed official PMIs from over the weekend. Friday's US session was good two-way business for AUD/USD traders with the price rising from 0.6722 to a high of 0.6740 and back again before another burst to the upside later in the day and into month-end.
Over the weekend, Chinese data disappointed in the official Manufacturing PMI arriving at 49.5 vs expected 49.6 while Services beat arriving at 53.8 vs 53.7. The Aussie is softer on the data considering this is showing that the manufacturing sector is in contraction for the fourth consecutive month due to the trade wars and subsequent slower demand. Other factors at play are the situation in Hong Kong while protests turned violent again over the weekend, outright strengthen the Dollar, piercing the 99 handle for the first time since 2017 and the Reserve Bank of Australia (RBA) in focus for this week which will be followed by Australian Gross Domestic Produce for the second quarter.
RBA to hold but GDP could be a game-changer
The RBA is expected to keep the cash rate on hold at 1%. "We expect the Bank to reiterate it is in ‘wait and see’ mode as it assesses the impact of tax cuts, rate cuts and easing in macro-prudential policy since May. A soft GDP the following day could see the market forecasters bring forward a RBA cut to Oct," analysts at TD Securities explained.
AUD/USD levels
Valeria Bednark, the Chief analyst at FXStree, explained that the AUD/USD pair is in bearish territory according to the daily chart:
"Technical indicators have recovered modestly within familiar levels, holding below their midlines. In the 4 hours chart, the pair offers a neutral-to-bearish stance, as it remains below all of its moving averages, while technical indicators have recovered modestly within negative levels, lacking clear directional strength. The pair could correct higher on a break above 0.6750, the immediate resistance, but the most likely scenario is a continued decline, particularly if the pair loses the 0.6700 level."
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