AUD/USD bulls prod 0.6500 after China PMI, Australia data, focus on Fed inflation

• AUD/USD picks up bids to reverse the previous day’s pullback from two-week high.
• China’s official PMIs for August Australia data came in mixed but were mostly impressive.
• US economics advocate Fed policy pivot and add strength to the upside bias.
• Cautious mood prod Aussie traders ahead of US Core PCE Price Index.

AUD/USD picks up bids to refresh intraday high near 0.6500 after China’s official NBS Manufacturing PMI marked a positive surprise early Thursday. In doing so, the Aussie pair reverses the previous day’s retreat from the highest level in two weeks while ignoring downbeat prints of China’s Non-Manufacturing and mixed outcomes of the Aussie Private Sector data.

That said, China’s official NBS Manufacturing PMI for August rose to 49.7 versus 49.4 expected and 49.3 previous readings whereas the Non-Manufacturing PMI came in as 51.0 compared to 51.5 prior and market forecasts of 51.1.

Further, Australia’s Private Capital Expenditure (Capex) for the second quarter (Q2) 2.8% from 2.4% prior and 1.2% expected while the Private Sector Credit grows 0.3% MoM versus the analysts’ estimation of 0.3% and the previous readings of 0.2%. It’s worth noting, however, that Aussie Private Sector Credit eased to 5.3% YoY for July compared to 5.5% prior.

On Wednesday, Australia’s Monthly Consumer Price Index (CPI) flashed the 4.9% YoY figures for July versus 5.2% expected and 5.4% prior while the Building Permits slumps with -8.1% figure for the said month compared to -0.8% market forecasts and -7.7% figures reported in June.

Apart from the data, the disappointment from initial signals of Friday’s Nonfarm Payrolls (NFP) also lured the AUD/USD buyers as the ADP Employment Change dropped to 177K compared to 195K market forecasts and 371K previous readings (revised from 324K). On the same line, the second readings of the US second quarter (Q2) Gross Domestic Product (GDP) Annualized declined to 2.1% from 2.4% initial forecasts while the GDP Price Index also eased to 2.0% versus the first readings of 2.2%. Further, the preliminary readings of the Personal Consumption Expenditures (PCE) Prices also edged lower to 2.5% from 2.6% prior estimations for the said period.

That said, the US Consumer Confidence and activity data, as well as the housing market numbers, previously favored dovish calls about the US central bank and weighed on the US Dollar.

On a different page, China’s reaction to the US allegations that “it’s being risky for businesses” challenged the prior hopes of a smooth running of the Sino-American talks in Beijing, which in turn probed the AUD/USD buyers earlier on Wednesday. However, a slew of Chinese banks reduced mortgage rates and favored the hopes of witnessing more stimulus from the Asian major, which in turn repaired the damages to sentiment and defended the Aussie pair buyers. It’s worth noting that Bloomberg came out with news saying, “Australia and the European Union will resume talks on a free trade agreement after negotiations broke down in July,” which in turn also propels the prices of late.

Against this backdrop, the S&P 500 Futures struggle to track Wall Street’s gains amid a cautious mood ahead of the key US data. However, the benchmark US 10-year Treasury bond yields remain pressured at the lowest levels in three weeks, around 4.11% by the press time

Looking ahead, AUD/USD traders should closely observe the US Core PCE Price Index for August, expected to remain unchanged at 0.2% MoM but edge higher to 4.2% YoY from 4.1% prior, for intraday directions amid the Fed policy pivot concerns.

Technical analysis

AUD/USD buyers need clear upside break of 0.6500 to defend the early-week bullish breakout of a six-week-old resistance line, now immediate support near 0.6430.