AUD/USD: Bulls catch a breather around 0.7200 despite upbeat China PMI

AUD/USD eases to 0.7205, up 0.15% on a day, during the early Friday. The pair recently surged to the highest since February 2019 while touching 0.7215 mark. Though, the bulls seem to wait for a more strong push before challenging the two-year high even as China flashed welcome activity numbers for July.

China’s July month NBS Manufacturing PMI surged past-50.7 forecast and 50.9 prior to 51.1 whereas Non-Manufacturing PMI crossed 51.2 expectations with 54.2 figures.

Read: China's manufacturing PMI ticks higher to 51.1 in July

While AUD/USD fails to respect China's data, the pair buyers are likely watching the US dollar index (DXY) slump for fresh impetus. The greenback gauge refreshed the lowest since May 2018 before a few minutes.

Searching for the underlying reasons, we can say that the latest jump in the coronavirus (COVID-19)-led deaths from Texas and a rise in the pandemic numbers from China, coupled with the fears of more local lockdowns in the UK, hurt the market’s preference for the US dollar. Furthermore, a whopping 32.9% contraction in the US GDP also speaks loud for the US currency’s weakness.

Also adding to the risk-off mood could be the delay in the much-awaited phase 4 fiscal plan from the US and American President Donald Trump’s push for a delay in the November month’s Presidential Election.

Against this backdrop, US 10-year Treasury yields take rounds to the lowest since March whereas S&P 500 Futures rise 0.40% to 3,262 by the press time. However, stocks in Australia, Japan and China are down as we write.

Looking forward, traders will have to concentrate on the risk catalysts for fresh impetus while also waiting for the second-tier data from the US. Forecasts suggest, US Chicago Purchasing Managers’ Index (PMI) to recover from 36.6 to 43.9 whereas Michigan Consumer Sentiment Index could slip from 73.2 to 73.00 in July.

Technical analysis

The pair’s ability to cross April 2019 top surrounding 0.7210 enables it to attack the year 2019 high near 0.7300. However, overbought RSI may trigger fresh pullback in a case where AUD/USD prices slip below July 22 high near 0.7180.