AUD/USD at weekly lows, trading around 0.6975

• The Australian dollar was boosted by Chinese GDP optimism and improving Australian consumer sentiment.
• The New York Fed’s Empire State Manufacturing Index plunged as business conditions deteriorated, raising speculation of a Fed turnaround.
• AUD/USD traders are keeping an eye on the Fed, US PPI, Retail Sales and Australian jobs data.

The Australian dollar (AUD) is paring some of its losses from Monday and rising on a US dollar (USD) offered across the board, despite a subdued mood around Wall Street. US corporate earnings are likely to continue to boost market sentiment amid a lack of top-tier data. At the time of writing, the AUD/USD pair is trading at 0.6974.

AUD/USD rises but fails to break above 0.7000

Wall Street continues to lose traction as sentiment worsens. US data released before stock markets opened showed manufacturing activity in New York fell to its lowest level in January, the New York Federal Reserve (Fed) reported. Digging deeper into the report, business activity contracted sharply, with the index falling 22 points to -32.9. The Inform showed that new orders and shipments declined substantially, while delivery times remained unchanged and inventories pointed higher.

The softer-than-expected data lifted the AUD/USD pair, which reached a fresh daily high of 0.6993, before reversing some of its gains. For its part, the Dollar Index, which tracks the price of the dollar against a basket of six currencies, fell 0.11% to 102,448, weighed down by the fall in yields on US Treasury bonds.

On the Australian side, encouraging data from China, mainly Gross Domestic Product (GDP), which beat expectations of 1.6% to 2.9% in the fourth quarter, boosted the Australian dollar (AUD). Looking at annual data, Chinese GDP stood at 3%, well below the Communist Party’s forecast of 5%, and was 8.1% lower than in 2021.

Although Chinese data for the full year disappointed, its reopening is being applauded by market investors as the Hang Seng is up nearly 14% since the start of 2023. Additionally, the Australian consumer sentiment release improved for the second consecutive month, standing at 5.0%, compared to 3.0% in December.

Looking ahead to the week, the US economic agenda will be attended by the president of the New York Fed, John Williams, who will cross the news on Tuesday. On Wednesday, the calendar will feature Retail Sales, Producer Prices (PPI), and more statements from the Fed.

AUD/USD Key Technical Levels