AUD/USD posts modest gains as Australia’s PMIs improved

• AUD/USD registers a 0.14% gain in the Asian session, stabilizing at the 200-DMA.
• Business activity slightly recovered in Australia but remains shy of expanding.
• High US Treasury yields capped the AUD/USD rise on Tuesday’s session.
• Traders eye key US GDP data and the core PCE index on the horizon.

The AUD/USD opened the Asian session virtually unchanged, but on Tuesday registered decent gains of 0.14%, bracing at around the 200-day moving average (DMA) at 0.6578. The lack of catalyst keeps the pair within familiar levels, capped by the 50 and 100-DMAs, each above and below the current exchange rate. At the time of writing, the AUD/USD trades at 0.6579.

AUD/USD looms around the 200-DMA as Aussie’s business activity remains sluggish

Sentiment remains mixed as Wall Street’s closed mixed, with the Nasdaq and S&P 500 closing in the green, while the Dow Jones lost 0.25%. US Treasury bond yields in the belly and the long-end of the curve rose and boosted the Greenback (USD), capping the AUD/USD gains above the 200-DMA.

On the data front in the United States, the Philadelphia Fed Non-Manufacturing Index dropped to -3.7 from a revised 2.1 in December, while the Richmond Fed Manufacturing Index fell in January. The reading came at -15, below forecasts and the prior month’s -11 contraction.

In the meantime, money market futures trimmed the Fed’s odds for a rate cut in March, though in May, a fully 25 basis point (bps) cut is priced in, and the chances for a 50 bps lie at 50%.

The NAB Business conditions worsened to 7 in December on the Aussie front.

Recently, Australia’s Judo Bank Manufacturing PMI improved from 47.6 to 50.3, while the Services stood at recessionary levels despite improving from 47.1 to 47.9. The Composite Index rose by 48.1 from 46.9. Warren Hogan, Chief Economic Advisor at Judo Bank, said: “The Judo Bank Flash PMI for January provides a first look at the economy in the new year. Encouragingly, we have seen a modest improvement in business conditions in January, with a stabilization in service sector activity and a pick-up in manufacturing output.”

On the US front, the economic docket will feature S&P Global Flash PMIs, ahead of Thursday GDP and the Fed’s favorite inflation gauge, the core PCE.

AUD/USD Price Analysis: Technical outlook

Despite clinging to the 200-DMA, the AUD/USD could remain sideways, capped on the upside by the 0.6600 figure. A breach of the latter will expose the 50-DMA at 0.6649 before testing 0.6700. On the flip side, a drop below 200-DMA at 0.6577 and the 100-DMA at 0.6522, would open the door to test the 0.6500 mark. The further downside lies at the major support level at 0.6338, the latest cycle low on November 10.