The Australian dollar ends the week with losses due to frail PMI indices

The Australian dollar has suffered a sustained decline in recent sessions as RBA gains slowly fade away.
PMI data from Australia reveals weaker-than-expected data.
The instability of the Australian economy appears to be driving demand in Australia.

During Friday’s session, the Australian dollar (AUD) deepened its losses against its peers. The AUD/USD duo is testing its significant support at the 0.6640 threshold, the 20-day elementary moving average (SMA). There was selling pressure in Asian markets in lithe of frail June flash PMIs from Judo Bank in Australia. This weakening was intensified by high yields of US treasury bonds and positive PMI data from the US agency S&P, which increased the USD rate.

Despite some signs of weakness in the Australian economic scene, persistently high inflation continues to prompt the Reserve Bank of Australia (RBA) to delay potential interest rate cuts, potentially offsetting Australian losses. The RBA has a chance to be among the last central banks from the G10 group to initiate interest rate cuts, which may consolidate the Australian’s profits.

Daily market movement summary: Australian dollar struggles with frail data and waits for further signals

Australia reported weaker preliminary June Purchasing Managers’ Index (PMI) data, with manufacturing at 47.5 compared to May’s 49.7, services at 51.0 compared with 52.5 and the interest rate falling for a third month from to 50.6 from 52.1 in May.
In contrast, U.S. private sector business activity continued to show solid growth, with the S&P Global Composite PMI improving slightly to 54.6.
Governor Bullock confirmed during her recent press conference that the Council had discussed potential interest rate increases, while rejecting consideration of rate cuts in the near future.
Bullock maintained that “Inflation remains above target and is proving to be sustainable,” specifying that “Management expects it will be some time before inflation is persistently within the target range.”
The RBA reaffirmed its willingness to do “whatever is necessary” to bring inflation back on target.
The market predicts interest rate easing by almost 50 basis points by December 2025, while the RBA website does not rule out rate increases in August and September.
The Fed is signaling just one cut in 2024, while markets remain hopeful of a cut in September.

Technical Analysis: Signs of weakening bullish power, it’s time

The technical front is showing weakening momentum, the relative strength index (RSI) remains above 50 but is tilting to the downside, and the moving average divergence (MACD) continues to show red bars. To further confirm a more solid buying stance, the AUD/USD pair needs to hold firmly above the 20-day Simple Moving Average (SMA). Merchants can extend the trial period of said SMA support in subsequent sessions to test its robustness.