AUD/USD Forex Technical Analysis – Aussie Falls after China Factory Activity Contracts in August

The Australian Dollar is down against the U.S. Dollar on Thursday as investors braced for higher U.S. interest rates. Expectations for a 75-basis-point U.S. rate hike at this month’s Federal Reserve meeting are rising on the back of solid economic data, with Fed funds futures last pointing to a 73% chance of such an increase.

Weak manufacturing data from Australia and China are also weighing on the currency.

At 02:42 GMT, the AUD/USD is trading .6821, down 0.0022 or -0.32%. On Wednesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $67.72, down $0.15 or -0.23%.

Earlier in the session, the AIG Manufacturing Index came in at 49.3, down from last month’s 52.5 reading. This indicates the manufacturing sector is contracting.  Private Capital Expenditure also fell 0.3%, lower than the 1.1% estimate and the upwardly revised previous reading of 0.4%.

In China, factory activity contracted for the first time in three months in August amid weakening demand, while power shortages and fresh COVID-19 flare-ups disrupted production, a private sector survey showed on Thursday.

Later today at 11:30 GMT, traders will get the opportunity to react to the latest Challenger Job Cuts report. This will be followed at 12:30 GMT by Weekly Unemployment Claims, Revised Nonfarm Productivity, and Revised Unit Labor Costs. At 14:00 GMT, the major report is the ISM Manufacturing PMI report. Data on Construction Spending will also be reported.

The ISM Manufacturing report is expected to come in at 52.1, down slightly from 52.8. A move under 50.0 will indicate a contraction.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7009 will change the main trend to up.

The short-term range is .6682 to .7137. The market is currently trading on the weak side of its retracement zone at .6856 to .6910, making it resistance.

Daily Swing Chart Technical Forecast

Trader reaction to .6842 is likely to determine the direction of the AUD/USD on Thursday.

Bearish Scenario

A sustained move under .6842 will indicate the presence of sellers. With the AUD/USD also trading on the weak side of the short-term Fibonacci level at .6856, the Forex pair is set up for a steep loss with the July 14 main bottom at .6682.

Bullish Scenario

A sustained move over .6842 will signal the presence of buyers. Overcoming the Fibonacci level at .6856 will indicate the buying is getting stronger. This could trigger a further move into the short-term 50% level at .6910.