AUD/USD drops below 0.7000 as USD selloff dissipates
- Manufacturing sector's activity expanded at a softer pace than expected in China.
- US Dollar Index looks to snap six-day losing streak.
- Markit Manufacturing PMI in US is expected to come in at 52.5 in December's final reading.
The AUD/USD pair closed the last seven trading days of 2019 in the positive territory and reached its highest level since late July at 0.7032 on December 31st. With investors returning from the New Year break, the pair reversed its course and slumped below the 0.70 handle. As of writing, the pair was down 0.35% on the day at 0.6992.
AUD/USD rally loses steam
Although the People's Bank of China's (PBOC) decision to cut the Reserve Requirement Ration (RRR) at the start of 2020 provided a boost to the market sentiment, the AUD failed to capitalize on that as the other data from China revealed that the manufacturing sector expanded at a softer pace than initially forecasted in December with the Caixin PMI dropping to 51.5 from 51.8.
On the other hand, the greenback started the new year on a strong footing with the US Dollar Index staging a decisive recovery following the sharp drop witnessed during the last week of the year. Ahead of the IHS Markit's final reading of December Manufacturing PMI, the index is up 0.25% on the day at 96.68.
In the early trading hours of the Asian session on Friday, the ANZ Job Advertisements data from Australia will be looked upon for fresh a catalyst.
Previewing the AUD/USD possible performance in 2020, "going forward its seems to reasonable to assume that the AUD will remain sensitive to the global growth outlook with a particular focus on the outlook for China," said Rabobank analysts. "We would look to sell rallies above AUD/USD 0.70 and look for a move back towards the 0.67 area of a 3-month view."
Technical levels to watch for
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
