31st July 2020 - AUD/USD: Bulls keep flirting with 0.7200 ahead of China PMI


Good Morning,

Market Headlines

Equity Markets fell overnight over concerns about earnings, US data, stimulus and the US elections, DJIA fell 0.85%, to 26,313.65 and SPX fell 0.38%, to 3,246.22. On the Commodities front, Brent crude futures fell 1.5% to $43.10, copper fell 0.2%, iron ore rose 0.2% to $110.65, and gold fell 0.8%.

Currencies

The US dollar index finished 0.5% lower on the day, making a fresh low since May 2018.

EUR 1.1730 to 1.1844 – the highest since June 2018.

AUD/EUR 0.6042 - 0.6099

USD/JPY slipped from 105.30 to 104.80.

AUD initially lower to 0.7121, but later rebounded to 0.7180.

NZD 0.6620 - 0.6678.

AUD/NZD 1.0800 to 1.0740.

AUD Thoughts

- AUD/USD: Bulls keep flirting with 0.7200 ahead of China PMI

- US Dollar Index slumps to mid-May 2018 bottom taking clues from devastating GDP, virus woes and political drama at home

- China’s official PMIs precede second-tier Aussie data to offer near-term direction

Moving on, China’s July month official PMI numbers become the key ahead of the Aussie Private Sector Credit for June and Producer Price Index (PPI) for the second quarter (Q2). Forecasts suggest that Chinese Manufacturing PMI may recede from 50.9 to 50.7 with Non-Manufacturing PMI likely stepping back from 54.4 to 51.2. Further, Australian Private Sector Credit is expected to rise from -0.1% to +0.2% MoM whereas PPI may inch up from 0.2% to 0.3% on the QoQ basis. While data from China signals the pair’s another pullback from the key 0.7200, pessimism surrounding the US can keep the bulls hopeful.

Despite the higher high formation, AUD/USD prices will have to cross April 2019 top surrounding 0.7210 to confirm run-up towards March 2019 peak close to 0.7300. However, sellers are less likely to take the risk of entry unless witnessing a clear break below 0.7065/60 area including June 10 high and July 24 low.

Event Risk Data Today

AU: Private Sector Credit for June and Producer Price Index (PPI)

NZ: ANZ consumer confidence (prior: 104.5).

CH: Manufacturing and non-manufacturing PMIs

US: Personal income (prior: -4.2%, market f/c: -0.7%). Personal spending (prior: 8.2%, market f/c: 5.3%). June PCE

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