The Australian Dollar (AUD) declined to 0.7000 against the US Dollar (USD) after reaching a daily high of 0.7050, as the US Dollar strengthened on the back of robust US economic data and easing geopolitical tensions in the Middle East [1]. The US ISM Manufacturing PMI for July registered at 55.6, up from 53.3, marking its highest level since 2022. The report's sub-components indicated ongoing hiring in the manufacturing sector, though input costs remained elevated, reflecting mixed but overall positive momentum in US manufacturing [1].
The risk-on sentiment in broader markets was offset by the US Dollar's recovery, which was further supported by a more than 7.70% drop in West Texas Intermediate (WTI) oil prices to $80 per barrel, following progress in US-Iran talks. This development reduced expectations for higher interest rates from the Federal Reserve. Additionally, recent interventions in the FX markets by US and Japanese authorities initially buoyed the Aussie Dollar, but as the Yen weakened, the AUD also lost ground [1].
Looking ahead, the US economic calendar is packed with key employment data releases, including the ADP Employment Change, JOLTS job openings, jobless claims, and Nonfarm Payrolls. These reports are expected to provide further insight into the labor market, which, if strong, could influence next week’s inflation data and potentially impact Federal Reserve policy decisions. New York Fed President John Williams stated that monetary policy is well-positioned to return inflation to the 2% target, but emphasized that the Fed would not hesitate to raise rates if necessary, while remaining optimistic about achieving the inflation goal [1].
In Australia, upcoming releases include ANZ job advertisements for June and the ANZ-Roy Morgan Australian Consumer Confidence index. Technically, AUD/USD is trading at 0.6999, with resistance at 0.7007, and the broader uptrend remains intact as long as the pair holds above key trend-line support levels. The Relative Strength Index (RSI) at 52 suggests neutral-to-slightly constructive momentum, indicating a lack of strong directional conviction in the near term [1].
CONCLUSION
The Australian Dollar's retreat to 0.70 was driven by stronger-than-expected US manufacturing data and a rebound in the US Dollar, despite a generally risk-on market mood. Market participants are now focused on upcoming US employment and inflation data, which could further influence currency movements and Federal Reserve policy expectations.