AUD/USD traded sharply higher today despite stronger U.S. data and weaker Australian data. According to the latest report, service sector activity slowed in the month of September with the PMI index dropping to 52.1 from 53. Yet investors found relief in the World Bank’s upgraded GDP forecasts for China. The organization raised its China growth forecast by 0.2% from 6.5% to 6.7% in 2017 as they feel that the “economic outlook for the region remains positive and will benefit from an improved external environment as well as strong domestic demand.” The Australian dollar will remain in focus this evening with retail sales and the trade balance scheduled for release.
The recent slowdown in manufacturing activity suggests that trade activity may have slowed and according to PMI services, retail sales contracted for the sixth consecutive month on growing competition from online and offshore sellers. They also felt that spending was being dampened from slow wage growth and rising housing/energy costs. None of this is good news for AUD/USD and could drive the currency pair lower once again.
Technically, however, AUD/USD enjoyed its strongest one day rise in nearly 2 weeks but today’s rally stopped right at the 10-day SMA. With that in mind, the more significant resistance is near 0.7950. Support is at yesterday’s low of .7785, if this level is broken, AUD/USD will see a steeper slide down to 77 cents.
