The AUD/USD pair showed notable strength on Friday, inching closer to the 0.6940 mark as the US Dollar (USD) faced downward pressure following the release of disappointing labor market data from the United States. The Australian Dollar (AUD) received an additional boost from encouraging Australian Purchasing Managers Index (PMI) figures, indicating slight improvements in domestic business activity.
In the US, recent employment statistics suggested a cooling labor market. Weaker-than-expected job creation strengthened the belief that the Federal Reserve (Fed) might have limited scope for maintaining a restrictive monetary policy. This, in turn, led to a decline in Treasury yields and diminished demand for the Greenback.
In contrast, Australia’s S&P Global Composite PMI saw an uptick to 50.4 in June, up from 49.8, moving back above the crucial 50-mark that signals expansion. The Services PMI also improved, rising to 50.5 from a previous 49.9, indicating a return to modest growth within the service sector.
The performance of the Chinese economy also appears to be a critical factor affecting the AUD, with the China RatingDog Services PMI registering at 54.1 for June, slightly dipping from last month’s 54.4 but remaining firmly in expansion territory. Given Australia’s dependence on Chinese demand for exports, the steady performance in the Chinese services sector is likely to bolster sentiment around the Australian Dollar.
From a technical standpoint, the AUD/USD pair is trading at approximately 0.6938 on the 4-hour chart. The pair is trying to stabilize following a modest rebound but is currently restrained just below the 100-period Simple Moving Average (SMA) around 0.6967, which continues to cast a mildly negative outlook, despite some signs of improving momentum.
The 20-period SMA, currently near 0.6910, acts as immediate support. The Relative Strength Index (RSI) sits at about 60, indicating a recovery in buying pressure, though it has yet to convincingly breach the resistance levels. On the upside, initial resistance is found at around 0.6945, followed by the more significant barrier at 0.6967. To alleviate the downward cap, reclaiming this resistance level will be essential.
Conversely, immediate support for the pair is situated at 0.6931, with further support zones appearing at 0.6922 and 0.6912, before the aforementioned 20-period SMA at 0.6910. A breach below this level could expose the market to deeper pullbacks and trigger additional downward movement towards established range bases.
