Australian Dollar stalls below 0.7170, halfway through last two weeks’ range

AUD/USD recovery from 0.7120 lows meets resistance at 0.7170.
Data released on Wednesday shows that Australia's trade surplus narrowed in July.
In the US, ADP Employment data disappointed, and Fed Williams advocated for a "wait and see" approach on rates.

Guillermo Alcala FXStreet

The Australian Dollar (AUD) edges down against the US Dollar (USD) on Thursday, following a narrowing trade surplus in Australia and fairly positive PMI data from China, a key trading partner. The AUD/USD trades at 0.7160 after Wednesday’s rebound from lows near 0.7120 was capped at the 0.7170 area, halfway through the last two weeks' trading range.

Traders are reluctant to bet against the US Dollar following hawkish comments from the Federal Reserve’s Chairman, Kevin Warsh, at the Jackson Hole summit last week, which boosted expectations that the central bank will hike interest rates at its September 16 meeting.

Strategists at Scotiabank observe that markets are now pricing “a 70% chance of the Fed raising rates 25bps later this month,” reinforcing the Dollar’s support amid the risk-off tone.

Australian Trade surplus narrows

In Australia, Trade Balance data released earlier on the day by the Australian Bureau of Statistics revealed that the surplus narrowed by 418 million in July to 1.923 million. Exports declined 3.3% following a 9.1% jump in June, offsetting a 2.5% drop in imports that follows a 0.7% decline in the previous month.

A few minutes later, China's RantingDog Services Purchasing Managers Index (PMI) report showed stronger-than-expected business activity, with the Index rising to 51.4 in August from 50.4 in July, as stronger domestic demand helped businesses to create more jobs for the fourth consecutive month. The data, however, failed to provide any significant impulse to the China-proxy AUD.

In the US, ADP figures released on Wednesday showed a 38K increase in net private employment in August, the weakest reading in the last seven months. Apart from that, New York Federal Reserve President John Williams said that rising bond yields are due to a solid economy, rather than to inflation fears, and suggested that the central bank should “wait and see” before taking decisions on interest rates.

Economic Indicator

Trade Balance (MoM)

The trade balance released by the Australian Bureau of Statistics is the difference in the value of its imports and exports of Australian goods. Export data can give an important reflection of Australian growth, while imports provide an indication of domestic demand. Trade Balance gives an early indication of the net export performance. If a steady demand in exchange for Australian exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the AUD.

Economic Indicator

RatingDog Services PMI

The RatingDog Services 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 services 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 services economy is generally expanding, a bullish sign for the Renminbi (CNY). Meanwhile, a reading below 50 signals that activity among service providers is generally declining, which is seen as bearish for CNY.

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