- AUD/USD dropped into negative territory during American session.
- US Dollar Index extended its rebound above 92.30.
- Focus shifts to second-quarter GDP data from Australia.
The AUD/USD pair climbed above 0.7400 earlier in the day and touched its highest level in two years at 0.7414 but reversed its direction during the American session. With the greenback gathering strength against its major rivals, the pair slumped to a daily low of 0.7360 in the last hour. As of writing, AUD/USD was down 0.08% on the day at 0.7368.
The USD’s market valuation remains the primary driver of AUD/USD’s movements on Tuesday. The US Dollar Index (DXY) closed the first day of the week with modest losses but continued to push lower after breaking below 92.00. However, the upbeat macroeconomic data releases from the US helped the DXY gain traction. At the moment, the index is up 0.15% on the day at 92.30.
The ISM’s monthly report showed that the Manufacturing PMI improved to its best level since early 2019 at 56 in August. This reading came in better than the market expectation of 54.5 and showed that the economic activity in the manufacturing sector continued to expand at a strong pace.
Eyes on Australian GDP report
In the early Asian session on Wednesday, the Australian Bureau of Statistics will release the second-quarter GDP data. The market consensus points out to a contraction of 6% on a quarterly basis.
A worse-than-expected reading could cause investors to price a more dovish monetary policy outlook and cause AUD/USD to continue to remain on the back foot. On the other hand, a positive print could help the pair stay resilient but additional gains beyond 0.7400 don’t seem likely in the near-term given the overbought conditions.
Technical levels to watch for
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