The Australian Dollar (AUD) remained under pressure on Wednesday, giving back gains from the previous session as the US Dollar (USD) extended its rally. Despite stronger-than-expected domestic GDP data and upbeat Chinese services figures, AUD/USD traded flat, reflecting cautious sentiment ahead of key US labor market data and the Federal Reserve’s Beige Book.
Australia’s Q2 GDP beats forecasts, but AUD reaction muted
The Australian Bureau of Statistics reported a 0.6% quarter-on-quarter GDP growth for Q2, surpassing market expectations of 0.5%. Annual growth accelerated to 1.8%, up from a revised 1.4% in Q1. While the data signals resilience in the Australian economy, it failed to spark bullish momentum in the Aussie, as broader market dynamics overshadowed domestic fundamentals.
China’s services PMI surprises to the upside
China’s Caixin Services PMI climbed to 53.0 in August, beating forecasts of 52.5 and marking an improvement from July’s 52.6. The upbeat data offered some support to risk sentiment, given Australia’s close trade ties with China. However, mixed signals from China’s manufacturing sector—where official PMI remained below the 50 threshold—tempered optimism.
US Dollar gains on treasury yields, Fed rate cut Expectations loom
The US Dollar Index (DXY) continued its upward trajectory, trading near 98.50 as Treasury yields climbed. The 2-year yield stood at 3.65%, while the 10-year reached 4.28%, attracting capital inflows and boosting demand for the greenback. Still, dovish commentary from Fed officials and rising expectations of a rate cut in September could cap further USD upside. The CME FedWatch tool now prices in a 91% probability of a 25-bps cut, up from 86% a day earlier.
Traders eye US labor data for Fed policy clues
Market participants are closely watching upcoming US employment reports—including ADP payrolls, average hourly earnings, and nonfarm payrolls—for signals on the Fed’s next move. These data points will be pivotal in shaping September’s policy decision.
RBA rate cut bets fade as inflation surprises higher
Australia’s monthly CPI rose 2.8% YoY in July, beating forecasts and reducing the likelihood of near-term rate cuts by the Reserve Bank of Australia. However, weak building permit data—down 8.2% MoM—highlighted ongoing challenges in the housing sector.
AUD/USD technical outlook: bearish momentum building
AUD/USD is hovering around 0.6520, having broken below its ascending trendline on the daily chart. While still above the 9-day EMA at 0.6516, a decisive break below this level could confirm bearish momentum. Further support lies at the 50-day EMA of 0.6502, with a potential retest of the three-month low at 0.6414 if selling pressure intensifies.
On the upside, a recovery above 0.6540 could open the door to retesting the five-week high of 0.6568 and possibly the nine-month peak of 0.6625.
