- 10-year US yields experienced their most significant single-day decline in over three months on Wednesday.
- Traders exercised caution ahead of Powell’s speech.
- There was a substantial drop in its flash US Composite PMI index.
Today’s AUD/USD outlook is slightly bearish. On Thursday, the dollar pared gains due to investor caution resulting from weaker-than-anticipated economic data. Consequently, this clouded the interest rate outlook before the Federal Reserve’s Jackson Hole symposium.
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Meanwhile, on Wednesday, 10-year US yields experienced their most significant single-day decline in over three months. This decline followed data indicating weak US business activity growth in August. This signaled a potential slowdown in the economy.
Moh Siong Sim, a currency strategist at the Bank of Singapore, noted that PMI data implied a less optimistic outlook. Therefore, it could prompt developed market central banks to be cautious about further tightening.
S&P Global reported a substantial drop in its flash US Composite PMI index from 52 in July to 50.4 in August. This marked the most substantial decrease since November 2022. A robust labor market and solid consumer spending mitigated recession fears and prompted upward revisions in GDP growth predictions. However, Wednesday’s data painted a less vibrant economic picture.
Notably, market movements remained modest as traders exercised caution. This was in anticipation of potential surprises during Fed Chair Jerome Powell’s speech at Jackson Hole on Friday. Isabel Albarran, an Investment Officer at Close Brothers Asset Management, stated that market participants sought direction as the Jackson Hole Symposium commenced.
Moreover, according to Albarran, a cooling labor market, lackluster PMIs, and declining CPI could indicate that rates are approaching their peak.
AUD/USD key events today
The US will release reports on core durable goods orders and initial jobless claims. These reports might cause some volatility as they will paint a picture of the state of the economy.
AUD/USD technical outlook: 0.6450 support level retest underway.
On the charts, AUD/USD has retreated to retest the 0.6450 support level. However, the bias is still bullish as the pullback is above the 30-SMA. Moreover, the RSI sits slightly above 50, supporting bullish momentum.
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Therefore, bulls might be waiting to resume the uptrend at the 0.6450 support or the 30-SMA. If they do, the price will likely rise to retest the 0.6500 resistance level. On the other hand, a break below these support levels would lead to a retest of the 0.6400 support.
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