The Aussie is rising and seeking a broader rally against the dollar.
AUD/USD – Daily chart
AUD/USD rose for the third day in a row and met resistance at the previous support at 0.6460.
Today marks the start of the Jackson Hole Seminar, a three-day annual event for central bankers. We are likely to hear comments from central bankers before the weekend, with Fed Chair Jerome Powell and ECB President Christine Lagarde speaking on Friday.
Australia released its August PMI report on Wednesday, highlighting the slowdown in manufacturing and services. Australia’s manufacturing sector continues to struggle and has been in decline for six consecutive months. The manufacturing PMI eased back to 49.4 in August, down slightly from 49.6 in July. The situation is worse in Europe, where the figure in Germany is less than 40, as the country is battling an economic recession.
New orders in Australia have fallen, leading to lower production, while a slowdown in China means production may not pick up anytime soon. China, Australia’s largest trading partner, is currently suffering some deflation and economic deterioration.
Australia’s services sector also struggled, with the PMI falling to 46.7 in August from 47.9, the lowest level in 19 months. The weak PMI data is a testament to the slowdown in the Australian economy and the RBA will continue to slow the pace of interest rate hikes.
Despite the weak economy, the sell-off could be excessive, and traders will look for drivers of dollar weakness at the Jackson Hole meeting.