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AUD/USD Daily Outlooks

AUD/USD Outlook: Aussie Relieved as China Reports Upbeat Data

  • A private-sector survey released on Monday revealed a growth in China’s services activity in May.
  • The US dollar found support from increased Treasury yields.
  • Interest rate traders are assigning a 1-in-4 chance of a rate hike next week.

Today’s AUD/USD outlook is slightly bearish. The Australian dollar wiped initial gains from a report indicating increased services activity in China, a crucial trading partner.

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A private-sector survey released on Monday revealed a growth in China’s services activity in May. This growth was driven by the rise in new orders that supported the ongoing economic recovery led by consumption in the second quarter.

Surprisingly, the Caixin/S&P Global services purchasing managers’ index climbed from 56.4 in April to 57.1 in May, surpassing the 50-point threshold.

Meanwhile, the US dollar found support from increased Treasury yields following the data release on Friday. The data revealed a significant increase of 339,000 in public and private sector payrolls in May. Moreover, this figure surpassed the average forecast of 190,000 by economists. 

Despite stronger-than-expected job growth, wage pressures eased, and the unemployment rate rose from a 53-year low. This scenario could allow the Federal Reserve to pause its rate hike campaign at the upcoming June 13-14 meeting.

However, market expectations for rate cuts later in the year fell, and traders shifted their rate hike bets to July. According to CME Group’s FedWatch tool, interest rate traders are currently assigning a 1-in-4 chance of a rate hike next week. 

Furthermore, the market indicates a 70% probability of rates being at least a quarter point higher than the current level for July.

AUD/USD key events today

The US will release the services PMI and the ISM non-manufacturing PMI reports. These reports will give a clear picture of the level of business activity in these sectors, influencing the outlook for the broader economy.

AUD/USD technical outlook: Bears exhibit weakness amid pullback.

AUD/USD technical outlook
AUD/USD 4-hour chart

AUD/USD is retreating from recent highs in the charts, but the bias is still bullish. This is because the price is still far above the 30-SMA while the RSI sits above 50, showing solid bullish momentum. 

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Bears are leading the pullback but are showing weakness because the price makes small-bodied candles. Additionally, the pullback trades near 0.6600, a strong support level. Consequently, the price might bounce higher from this support to retest the 0.6650.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.