- Australian dollar slides close to 1%
The Australian dollar continues to show strong volatility for a second straight day. In the North American session, AUD/USD is trading at 0.6426, down 0.84%.
After a sleepy start to the week, the Aussie is showing some life. AUD/USD jumped 0.90% on Wednesday but has pared practically all of those gains today. The pair’s upswing on Wednesday was more a case of US dollar weakness than Aussie strength, as US PMIs pointed to deceleration in the manufacturing and services sectors.
The US Manufacturing PMI fell to 47.0 in August, down from 47.0 in July and well below the consensus estimate of 49.3. The manufacturing sector has been unable to find its footing, with declines in ten of the last eleven months. New orders are down and weaker demand has meant a decrease in output.
The services sector in the US is in better shape and posted a seventh straight month of growth in August. However, the Services PMI slowed to 51.0 in August, weaker than the July reading of 52.3 and the estimate of 52.2. Business activity in services has been falling and the August read was the lowest in six months. Consumer spending is down due to the usual suspects – high-interest rates and broad-based inflation. Interestingly, business confidence improved in August, likely due to expectations that US interest rates are close to their peak.
Weakness in manufacturing and services is not unique to the US, as we saw this week in PMI reports from Europe, the UK and Australia. Manufacturing and services continued to contract in Australia, as the August PMIs remained below the 50.0 level, which separates contraction from expansion. The weak PMIs are further signs of weaker economic activity, and the alarming slowdown in China will make it even more challenging for the Reserve Bank of Australia to guide the economy to a soft landing and avoid a recession.
AUD/USD Technical
- AUD/USD is testing support at 0.6431. Next, there is support at 0.6339
- There is resistance at 0.6588 and 0.6653
