AUD/USD gains after upbeat Australian manufacturing and services PMIs

The AUD/USD pair rose slightly after some positive data from Markit and Commonwealth Bank. The pair is trading at 0.6912, which is slightly higher than the intraday low of 0.6800.

Australia manufacturing and services PMI improve

Australia, like New Zealand, has been credited for its handling of the coronavirus pandemic. In total, the country recorded about 7,400 infections and about 100 deaths. The number of daily infections has declined from a peak of 537 in May to less than 20 yesterday.

The country has also started to reopen, with the government allowing many companies to go back to business. As a result, business activity has bounced back, according to the latest data by Markit and Commonwealth Bank.

The flash manufacturing PMI data released earlier today rose to 49.8 from the previous 44.0. While a PMI reading below 50 signals contraction, the improvement in the number is a positive thing.

The PMI is calculated by conducting a survey to manufacturers on output, employment, new orders, suppliers’ delivery times, and stocks of purchases. In the report, Markit said that output stabilised while employment remained weak. Confidence among manufacturers improved while prices improved after falling in the previous months.

Meanwhile, the services PMI jumped to 53.2 from the previous low of 26.9. The reason for this was obvious. As the government eased restrictions, more people started to go out as more companies in the services sector reopened. According to Markit, employment in the sector fell for the fifth straight month while input and output prices rose for the first time in three months. In a statement, Gareth Aird said:

“The June PMIs are consistent with our view that we are now past the low point in economic activity. Overall conditions are still soft, but there were a few encouraging pieces of information in the PMIs.”

China growth helped

In addition to the reopening, the AUD/USD and the Australian economy have been helped by the growing Chinese economy. China is important for Australia because it is its biggest trading partner.

In recent weeks, data from China has been relatively positive. Retail sales, exports and imports are growing and business is returning to normal in most cities. As a result, demand for most Australian goods like iron ore, copper, and coal has increased. There is a likelihood that the Chinese economy will do well in the future baring a second wave of the virus.

Meanwhile, the AUD/USD pair also reacted to a clarification by Donald Trump. In a tweet, the president said that the agreement signed between the United States and China was still intact. He was reacting to a statement by Peter Navarro, a China hawk, who said that the deal was “over.”

There have been concerned about this deal for a while now partly because China has not made large purchases as agreed. At the same time, according to Global Times, some Chinese officials have made the case for doing away with the deal. They argue that the Chinese economy will continue to do well even without the deal.

A trade deal between the US and China is important for Australia because it would lead to more demand for its products.

AUD/USD technical analysis

The AUD/USD pair is trading at 0.6912. On the daily chart, this price is above the 50-day and 100-day exponential moving averages. It is also above the important support of 0.6800. It is also forming a bullish pennant pattern, which is a sign that the pair may continue rising as bulls attempt to test the previous high at 0.7047.