AUD/USD Resumes Decline After Being Rejected by the 100 SMA

On Wednesday we saw a bullish run in risk currencies as the USD retreated lower, following a period of strong gains which lasted more than a month. Commodity dollars benefited form that and AUD/USD climbed more than 100 pips higher. The manufacturing and services Purchasing Managers’ Index (PMI) figures that were released that day were lower than expected. However, the US Services sector remained in expansion, unlike European counterparts which fell in contraction.

Concurrently, Australian economic indicators also fell short of initial expectations, with services activity already in contraction. The decline in US PMIs led to a decrease in US yields, contributing to the USD’s retreat. The Manufacturing PMI recorded a figure of 47 points, falling from the 49 points in July. The Services index, although fall short of expectations, remained in the expansion range at 51 points.

Simultaneously, the Services indices of countries like the UK, Germany, and Australia dropped below the 50-point threshold, suggesting contraction. So, the US economy is performing better in a sad global environment which leaves the USD as the strongest currency. This divergence in economic performance might lead to further strengthening of the USD, as the US economy appears relatively more robust compared to others.

So, the bullish momentum in AUD/USD didn’t last long and buyers refrained from pushing the price above the 100 SMA (green) on the H4 chart. This pair formed a doji candlestick up there which is a reversing signal and the price started tumbling lower yesterday, giving back a large part of the gains.

We shorted NZD/USD already so we refrained from exposing too much with another sell signal here. Although we remain bearish on this pair and are looking for another retrace higher, probably on smaller timeframes such as the H1 chart. The market attention is now focused on Jerome Powell’s upcoming speech at the Jackson Hole Symposium which will come in the evening.

AUD/USD Live Chart

ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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