AUD/USD rebounds despite USD strength, due to risk appetite and falling US yields.

• AUD/USD rose 0.51%, benefiting from the overall weakness of the US Dollar.
• Despite hawkish comments from several Fed officials, the US Dollar remains dovish, with the DXY showing modest gains at 105.55.
• Strong Australian PMIs and RBA rate hike considerations support AUD.
• Key economic data will be released next week, including the Consumer Price Index and retail sales in Australia, and consumer confidence and durable goods orders in the United States.

He Australian dollar (AUD) regained ground against the US Dollar (USD) on Friday, and remains set to finish the week with decent gains. The general weakness of the dollar, together with the search for risk by investors and the fall in US Treasury bond yields, are the reasons that explain the reaction of the Dollar. Hence, the AUD/USD pair recorded gains of 0.51%, trading at 0.6448 once the pair bounced from the low of 0.6403.

Australian Dollar Gains Traction as US Business Activity Suffers and Bond Yields Fall

S&P Global revealed that business activity in the United States (US) remains subdued and is failing to gain momentum but slowing down. The manufacturing PMI, despite the improvement, remained below the 50 threshold that separates expansion from contraction, while the services and composite PMIs clung to expansionary territory, despite printing lower readings in comparison. with August.

Aside from this, Federal Reserve officials maintained a hawkish stance, led by Fed Governor Michell Bowman saying more rate hikes are needed, while Susan Collins called for patience. Recently, San Francisco Fed President Mary Daly noted that the gradual rebalancing of labor market data is good news, but that more is needed to determine further policy tightening. She echoed Collins’ words: “Patience is a good strategy.”

That said, the Dollar continues to post modest gains, as shown by the Dollar Index (DXY) at 105.55, up 0.16%. However, profit-taking traders seem to be the reason for AUD/USD’s strength, along with the recent economic data revealed on the Australian Dollar side.

Australian PMIs were strong, showing a slight improvement compared to August, particularly the composite. The index rose 50.2, beating estimates of 47, driven by the jump in the Services segment, while manufacturing activity continued to deteriorate. This, along with the Reserve Bank of Australia’s (RBA) policy minutes showing the central bank considering raising rates in September, cushioned the AUD/USD pair’s decline, beyond the current week’s low of 0.6385.

Next week, the monthly consumer price index (CPI), retail sales and housing credit will be published in Australia. In the US, consumer confidence, durable goods orders, Initial Jobless Claims and the Fed’s preferred inflation indicator, the core CPI.

AUD/USD Price Analysis: Technical Outlook

AUD/USD remains consolidated around yearly lows, unable to record a new cycle high, which could trigger a rally. However, a triple bottom chart pattern is emerging, suggesting that further rallies are in store. If the pair crosses the confluence of the 50-day moving average (DMA) and the last cycle high of August 30 at 0.6522, it could confirm its validity. The next resistance would be 0.6600, followed by the 200-day moving average and the triple top target at 0.6695. On the contrary, if price development remains moderate and falls below 0.6400, it is likely to retest the year-ago low at 0.6357.