AUD/USD Price Forecast: Subdued below 0.7200, close to two-week top after China's PMI

AUD/USD kicks off the new week on a subdued note and moves little after Chinese data.
Geopolitical risks and hawkish Fed expectations underpin the USD, capping spot prices.
The bullish technical setup warrants some caution before positioning for deeper losses.

Haresh Menghani FXStreet

The AUD/USD pair extends the range play below the 0.7200 mark and moves little following the release of China’s RatingDog Manufacturing PMI, which eased to 51.8 in May from 52.2 in the previous month. Meanwhile, spot prices remain close to a two-week high touched on Friday and seem poised to appreciate further amid a constructive technical setup.

Friday's breakout through the 0.7180 confluence hurdle – comprising the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 50% Fibonacci retracement level of the May downswing – was seen as a key trigger for the AUD/USD bulls. Moreover, the Relative Strength Index (RSI) near 60 hints at constructive but not overextended momentum. Adding to this, the Moving Average Convergence Divergence (MACD) hovers in positive territory with a slight bullish tilt, reinforcing a cautious upside tone.

However, persistent geopolitical uncertainties, along with hawkish US Federal Reserve (Fed) expectations, assist the safe-haven US Dollar (USD) to recover further from Friday's two-week through and could act as a headwind for the AUD/USD pair. Apart from this, reduced bets for a June interest rate hike by the Reserve Bank of Australia (RBA) might contribute to capping spot prices near the 61.8% Fibo. retracement at 0.7198. This is followed by the 78.6% level at 0.7230. and then the recent cycle high area around 0.7271.

On the downside, initial support is provided by the 100-period SMA at 0.7177 and the nearby 50% retracement at 0.7175, ahead of the 38.2% level at 0.7153. Deeper protection emerges at the 23.6% retracement at 0.7125 and the swing low region around 0.7079.

(The technical analysis of this story was written with the help of an AI tool.)

AUD/USD 4-hour chart

Economic Indicator

RatingDog Manufacturing PMI

The RatingDog Manufacturing Purchasing Managers Index (PMI), released on a monthly basis by Caixin Insight Group and S&P Global, is a leading indicator gauging business activity in China’s manufacturing sector. The data is derived from surveys of senior executives at both private-sector and state-owned companies. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation.The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the manufacturing economy is generally expanding, a bullish sign for the Renminbi (CNY). Meanwhile, a reading below 50 signals that activity among goods producers is generally declining, which is seen as bearish for CNY.

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