AUD/USD grinds higher past 0.6450 as China Caixin Manufacturing PMI, US NFP loom

• AUD/USD struggles on the way to posting the first weekly gain in seven.
• Mixed China, Australia data joined cautious mood to prod the bulls despite keeping them in the driver’s seat.
• US inflation, activity and employment clues turn down hawkish concerns but may allow Fed to keep rates higher for longer.
• China Caixin Manufacturing PMI will precede US employment data for August, ISM Manufacturing PMI to provide fresh impulse.

AUD/USD portrays the typical pre-data anxiety as bulls take a breather around 0.6480-85 while marking the repeated attempts to stay beyond the 0.6500 as markets await the US employment report for August. Apart from the US Nonfarm Payrolls (NFP), the presence of China’s Caixin Manufacturing PMI and US ISM Manufacturing PMI also pushes the Aussie pair traders toward being cautious. Furthermore, Australia’s S&P Global Manufacturing PMI for August, expected to remain unchanged at 49.4 also prods the pair buyers.

That said, the Aussie pair remained on the front foot the previous day despite lacking momentum as mixed data from China, Australia and the US failed to offer any clear directions to the traders. Also, geopolitical concerns about the biggest customer China and doubts about its stimulus tested the AUD/USD bulls even as the broadly softer US Dollar allowed the pair buyers to keep the reins.

On Thursday, the US Dollar Index (DXY) recovered from the 200-DMA to print the first daily gain in four while ending the trading day around 103.65. Even so, the Greenback’s gauge versus the six major currencies remains on the way to snapping a six-week uptrend as the latest round of data challenges the Federal Reserve (Fed) hawks.

Among them, the Fed’s preferred inflation gauge, namely the US Core Personal Consumption Expenditure (PCE) Price Index for August, matched market forecasts of 4.2% YoY and 0.2% MoM versus 4.1% and 0.2% respectively priors. Further, the Initial Jobless Claims dropped to 228K from 232K prior (revised) versus 235K market forecasts while the Chicago Purchasing Managers’ Index rose to 48.7 for August compared to 44.1 expected and 42.8 previous readings. Additionally, Personal Spending rose past the 0.6% expected and previous readings to 0.8% for July whereas Personal Income eased to 0.2% for the said month, from 0.3% market forecast and prior.

At home, 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 readouts and market forecasts of 51.1. Furthermore, Australia’s Private Capital Expenditure and Private Sector Credit numbers failed to impress the Aussie bulls.

Elsewhere, the US-China trade war continues amid Beijing’s dislike of Western help to Taiwan. However, the fears of losing economic recovery from COVID push the policymakers to announce multiple stimulus. On Thursday, the Dragon Nation announced relief on the down payment of first and second home buyers to help the housing market. Previously, the bank cut many rates to infuse liquidity into the nation. However, the market’s doubts about the credibility of such measures make them less important for the AUD/USD pair.

Moving on, PMIs from Australia and China may entertain the AUD/USD pair traders and can allow the Aussie to edge higher. However, more important will be the US data considering the fears of Fed policy pivot, which if confirmed by softer statistics, can propel the pair prices.

Technical analysis

Despite the latest inaction around 0.6500, the AUD/USD pair’s successful breakout of a seven-week-old descending trend line and the 21-DMA, respectively near 0.6470 and 0.6445, keeps the buyers hopeful.