AUD/USD flat-lines below 0.6500 mark, reacts little to slightly better China PMI

The AUD/USD pair lacks any firm intraday directional bise on Friday and seesaws between tepid gains/minor losses through the Asian session. Spot prices, meanwhile, remain below the 0.6500 psychological mark and move little in reaction to the Chinese macro data.

A Caixin-sponsored survey showed that business activity in China’s manufacturing sector moved back into the expansion territory during August, smashing expectations for a fall for the second straight month. In fact, the Caixin China Manufacturing PMI rose to 51.0 from 49.2 in July, though does little to ease worries about the worsening conditions in the world's second-largest economy. This, in turn, fails to provide any meaningful impetus to the China-proxy Australian Dollar (AUD), though a modest US Dollar (USD) downtick lends support to the AUD/USD pair.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, struggles to capitalize on the previous day's solid recovery from a two-week low amid the uncertainty over the Federal Reserve's (Fed) future rate-hike path. The US macro data released earlier this week – the ADP report and the second estimate of the Q2 GDP print – suggested that the resilient US economy is starting to lose steam. That said, Thursday's US PCE Price Index data keeps the door open for one more 25 bps Fed rate hike by the end of this year.

In fact, the headline US PCE Price Index rose to 3.3% YoY in July from the 3% previous. Furthermore, the annual Core PCE Price Index – the Fed's preferred gauge of inflation – came in at 4.2%, a slightly stronger pace than the 4.1% increase recorded in June. Additional details of the report showed that Personal Income grew 0.2%, while Personal Spending rose 0.8% on a monthly basis – the strongest print since January. The USD bulls, however, prefer to wait on the sidelines ahead of the closely-watched US monthly employment details.

The popularly known NFP report is due for release later during the early North American session and will play a key role in influencing the Fed's policy outlook. This, in turn, will drive the USD demand and provide some meaningful impetus to the AUD/USD pair. Nevertheless, spot prices, for now, seem poised to end in the green for the first time in the previous six weeks as the focus now shifts to the RBA policy decision next Tuesday.

Technical levels to watch