- AUD/USD is set to finish the week with solid gains of 0.28%.
- The US ISM Services PMI was a tick lower than the previous month’s data, signaling the US economy is solid.
- AUD/USD traders eye Federal Reserve speeches throughout the day.
The AUD/USD jumped from around weekly lows below 0.6700 and climbed 0.44% on Friday. Factors like a risk-on impulse and an offered US Dollar (USD) keep the Australian Dollar (AUD) positive in the day. At the time of typing, the AUD/USD is trading at 0.6745.
AUD/USD creeps higher toward 0.6750
Sentiment remains upbeat, a headwind for the safety of the US Dollar. The US ISM Non-Manufacturing PMI for February was 55.1, slightly lower than the previous month’s 55.2. However, it exceeded expectations of 54.5, indicating that business activity is still strong. The Prices Paid Index subcomponent, looked by investors for inflationary pressures, increased to 65.6, above estimates of 64.5. Although it was lower than January’s 67.8, data would keep traders tracking Federal Reserve’s (Fed) officials’ speakers throughout the day.
US Federal Reserve’s (Fed) speakers highlighted the importance of tackling inflation towards the 2% target. On Thursday, Fed Governor Christopher Waller commented that inflation was not easing as expected and signaled his openness to increase rates if price pressures don’t reduce.
Following the release, the greenback weakened as the US Dollar Index recovered from daily lows and reached 104.924. As of writing, it resumed its downtrend at 104.848, down 0.11%.
The AUD/USD recovered after dropping toward 0.6732 and advanced towards 0.6760 before settling at around current exchange rates.
On the Australian side, the S&P Global Services PMI exceeded estimates, while the S&P Global Composite PMI was 50.6, higher than January’s 49.2, signaling the Australian economy is doing far better than expected.
Additionally, the Caixin Services PMI improved in China at 55, compared to 50.5 consensus, expanded at the fastest rhythm in six months in February as removing harsh COVID-19 restrictions revived customer demand, driving a solid increase in employment, a private sector survey showed on Friday.
What to watch?
Federal Reserve speakers will be crossing wires led by the Dallas Fed President Lorie Logan, Atlanta’s Fed Raphael Bostic, Fed Governor Michell Bowman, and the Richmond Fed President Thomas Barkin.
AUD/USD Technical levels
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The AUD/USD pair has seen a period of consolidation this week, with traders keeping a close eye on imminent Federal Open Market Committee speeches. At the start of the week the AUD/USD opened at 0.6745, and ended the week closing around 0.6740, with a slight shift experienced on Thursday.
The Federal Reserve Bank of the United States (Fed) will hold its initial Open Market Committee meeting for the year on Tuesday and Wednesday. This meeting will offer traders insight into the direction of US economic policy going forward this year. The meeting is also anticipated to provide additional feedback on the overall price recovery of the US economy.
The market is closely watching speeches by Fed officials this week. More precisely their view on US economic data and the nature of future monetary policy. Investors responded to recent policy moves by the Fed with optimism and this has seen the USD regain some of its lost ground against other currencies.
In addition to the Fed meeting, traders are also closely following US economic data, including the monthly nonfarm payroll report, consumer price index (CPI) and consumer sentiment index. Traders are looking for indicators of a tighter labor market, and this will likely be a determining factor on the direction of the AUD/USD.
Overall, key economic data and Federal Open Market Committee speeches will dominate this week’s outlook for the AUD/USD. While the pair is currently stuck in a tight range, traders will be monitoring the key economic and central bank events closely to predict the next move.