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Australian Dollar Under Pressure on Large PMI Miss. Are Global Macro Conditions Starting to Bite for AUD/USD?

Australian Dollar Under Pressure on Large PMI Miss. Are Global Macro Conditions Starting to Bite for AUD/USD?

Daniel McCarthy, Strategist

Australian Dollar, AUD/USD, PMI, ASX 200, CPI, RBA

  • PMI numbers for Australia disappointed markets as Omicron impacts are felt
  • The Australian Dollar and the ASX 200 are weaker to start the week as a result
  • All eyes are now focused on tomorrows Australian CPI. Will AUD/USD hold on?

The Australian Dollar has started the week on the back foot after the release of PMI data today. The January numbers show the IHS Markit Australian Composite PMI fell to 45.3 from 54.9 previously.

The services sector saw a similar decline to 45.0 against the prior read of 55.1 but the manufacturing PMI held 55.3, down slightly from 57.7 for December.

This is likely due to the impact of the spread of Omicron disrupting business activity with case numbers continuing to soar.

Australia’s ASX 200 fell 2.27% on Friday and it has opened 0.7% lower to start Monday morning.

The Australian Dollar also fell 0.57% on Friday and is slightly weaker already this morning.

Tomorrow will see the release of fourth quarter Australian CPI data that will play a significant role in RBA monetary policy discussions. The RBA are due to meet just over a week away, Tuesday 1st February.

Globally, inflation has become a problem for many central banks, most notably the Fed, and forced their hand toward tightening policy. However, it would take a massive miss in tomorrows’ numbers to see the RBA alter the course they have already signalled.

That is, the review of weekly asset purchases and likely reduction over time but no change in rates for now. The usual caveat that this is dependent on unfolding circumstances is likely to be included.

Australian Dollar Under Pressure on Large PMI Miss. Are Global Macro Conditions Starting to Bite for AUD/USD?

AUD/USD Technical Analysis

AUD/USD nudged below an ascending trend line to finish last week and remains below there this morning.

This move lower has also moved under all short, medium and long-term simple moving average (SMA) This could indicate that bearish momentum may evolve.

Last week’s low of 0.7170 might continue to provide support as well as the prior lows of 0.7130, 0.70825 and 0.69932.

On the topside, the SMAs might offer resistance and then the recent highs of 0.72768 and 0.73143 may offer resistance.

AUD/USD CHART

Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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