Australian dollar eyes China PMI amid fragile market sentiment

Today, the Australian dollar may continue climbing against the US dollar if risk sentiment stays intact. The pair rose more than half a percent last week, although some gains were trimmed going into the weekend due to Fed rate hike bets firming up the US dollar on Friday after the non-farm payrolls report. Market sentiment remains fragile as recession fears swirl, pushing traders into a tactically defensive posture.

Economic data from China may set the tone as Asia-Pacific trading kicks the week off. Caixin Global, a Chinese financial media firm, will unveil its purchasing managers’ index for the services sector at 01:45 GMT. The index contracted for a second month in April amid broadening Covid-19 lockdowns, falling to 36.2. If data today shows a rebound for May, it could inspire some risk-taking.

Elsewhere, a PMI report for Hong Kong from S&P Global is due out. The Asian financial hub’s economy has weathered Covid lockdowns better, likely due to the concentration on non-manufacturing firms amid the main drivers of local growth. Australia’s TD-MI inflation gauge (May) and ANZ job advertisements (May) are also due out. Thailand will report inflation numbers.

Crude oil prices look set to continue rising this week, bolstered by rising demand expectations across Asia, in large part due to easing restrictions in China. Saudi Arabia’s state-owned Aramco increased the premium it charges Asian oil customers by $2.10 a barrel for July. Brent crude prices may rise more versus WTI, as Aramco left prices unchanged for US customers.

AUD/USD technical forecast

The May swing high proved worthy resistance last week, a level that is likely to come back into play shortly. A break above that level would open prices up to the 61.8% Fibonacci retracement. Alternatively, bulls may look to the 38.2% Fib for support if Friday’s bearish action continues. The MACD and RSI oscillators are improving, modestly bolstering the case for further gains.

AUD/USD daily chart

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