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Higher Services and Prices Give AUD/USD Another Reason to Move Up

AUD/USD has been declining for about a month, breaking below 0.65, but yesterday we saw a bullish reversal which sent this pair around 60 pips higher. The soft ISM services and prices from the US was one of the reasons, while Jerome Powell’s speech was another one. Today, the services PMI from Australia showed the opposite of what we saw from the US, as they expanded in March, together with the composite and prices paid, giving the Australian dollar another reason to  move higher.

AUD/USD Chart H4 – The 50 SMA Has Been Broken

The Aussie was on a bearish trend for about a month, losing nearly two cents and piercing below 0.65 a coupleof times. But both times bnuyers came right back, pushing the price above this level, indicating that there is strong buyoingpressure down there. This forex pair was making lower highs since early March, with moving averages acting as resistance, particularly the 50 SM (yellow) on the H4 chart.

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But, after the climb yesterday following the negative US services report, this moving average was broken. Early this morning we had the services PMI report from Australia, which was quite positive, keeping the buying pressure on during the Asian session for AUD/USD .

S&P Global / Judo Bank Australian PMI, Services and Composite for March 2024

  • March Australian Final Services PMI: 54.4 points
    • This represents an increase from the February reading of 53.1 points.
    • A PMI reading above 50 indicates expansion in the services sector, so this indicates a further expansion, albeit at a slightly faster pace compared to the previous month.
  • March Australian Final Composite PMI: 53.3 points
    • This figure reflects the overall economic activity in Australia, combining both the services and manufacturing sectors.
    • It represents an improvement from the February Composite PMI reading of 52.4 points.
    • The increase in the Composite PMI suggests a broad-based expansion across both services and manufacturing activities in March, contributing to overall economic growth.

From the Services PMI Report

  • Output Index: The output index rose to a new cyclical high of 54.4, marking the fourth consecutive month of improvement. This significant increase of 8.4 points is the largest gain in the series outside of recovery from lockdowns.
  • Performance: The services output index is now above its long-run average level of 51.7, indicating a robust performance in the services sector. The March 2024 reading is the highest since April 2022, coinciding with the start of the monetary policy tightening cycle.
  • Outstanding Business Index: This index rose to its highest level since the Reserve Bank of Australia began raising interest rates in May 2022, suggesting optimism and confidence among businesses.
  • Other Activity Indicators: While some other activity indicators in the survey were slightly down in March, they remained well above the neutral 50 index level, indicating continued expansion in the services sector.
  • Cost Pressures: Cost pressures remain elevated, although there are signs of a gradual easing over the past six months. The input price index fell slightly to 61.5, the lowest since 2021, but still relatively high compared to the average reading in the second half of 2023.
  • Prices Charged: The Prices Charged Index remained unchanged at 55.0 in March, indicating that prices charged by service providers remained elevated. This suggests that businesses are passing on some of the increased costs to consumers.

Overall, the report contains mostly positive news, with strong output and business activity in the services sector. However, the persistent price pressures indicate that the Reserve Bank of Australia is unlikely to cut rates anytime soon. Market consensus for an initial rate cut is currently around September, reflecting expectations of continued economic strength and inflationary pressures.

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Skerdian Meta
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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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