Australian Dollar slips after upbeat US ISM Manufacturing data

AUD/USD extends its pullback toward the 0.6990 area during Monday's American session after stronger-than-expected United States (US) manufacturing data reinforced the US Dollar (USD). The pair had rallied above 0.7050 at the start of trading this week but failed to sustain gains as investors reassessed the Federal Reserve (Fed) outlook following resilient economic activity.

The ISM Manufacturing Purchasing Managers Index (PMI) rose to 55.6 in July, beating market expectations of 54.0 and improving from 53.3 in June. Meanwhile, the New Orders Index increased to 56.7 from 56.0, pointing to solid demand across the manufacturing sector. The Prices Paid Index eased to 71.1 from 73.0, although it remained well above the 50 threshold, suggesting inflationary pressure continues to persist despite some moderation.

The stronger ISM figures prompted a rebound in US Treasury yields and supported the Greenback, weighing on risk-sensitive currencies such as the Australian Dollar (AUD). However, the softer reading in the Prices Paid component could temper expectations of an even more aggressive Fed stance if inflation continues to cool gradually.

Attention now turns to the Asia-Pacific session, where Australia will release the final S&P Global Services and Composite PMIs for July. Markets expect the Services index to be confirmed at 53.0 and the Composite gauge at 52.6, both unchanged from their prior readings and consistent with a modest but steady expansion in private-sector activity. An upside surprise on either measure could hand the Aussie renewed support by reinforcing confidence in domestic business conditions, while a downward revision would suggest momentum in the services sector is fading.

Traders will also keep a close eye on China's RatingDog Services PMI, the privately compiled survey covering Australia's largest trading partner. The index is forecast at 53.7 in July, easing from 54.1 in June but still holding comfortably above the 50 mark that separates expansion from contraction.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.6993, hovering just under the 20-period Simple Moving Average (SMA) at 0.6997 while holding above the 100-period SMA at 0.6984, which suggests a broadly neutral near-term tone with a slight downside risk. The horizontal support at 0.6985 aligns with the longer-term SMA, forming a nearby demand area, while the Relative Strength Index (RSI) around 47 hints at consolidative momentum rather than a clear trending phase.

On the topside, initial resistance emerges at the 20-period SMA near 0.6997, followed by the horizontal barriers at 0.6999, 0.7009 and the former opening level at 0.7018, which together define a gradual supply zone overhead. On the downside, immediate support is seen at 0.6985, with the 100-period SMA at 0.6984 reinforcing this floor; a sustained break beneath this cluster would open the door to a deeper pullback within the current range.

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