August 23, 2022 01:22 AM ET
AUD/USD is down sharply after failing to break through the immediate 0.6900 level in the Asian session. It looks like the pullback from Monday's low of 0.6862 by the Aussie bulls is ending sooner than expected and a new wave of impulsive downside will be initiated. The asset has seen heavy bidding after the release of the Australian Purchasing Managers Index (PMI).
The S&P Global Manufacturing PMI fell sharply to 54.5, falling short of expectations of 57.3 and the previous release of 55.7, while the Services PMI fell to 49.6, falling short of expectations of 54 and the previous release of 50.9.
There is no denying the fact that the poor PMI data could be one of the consequences of the Reserve Bank of Australia raising the official discount rate (OCR). To contain runaway inflation, RBA Governor Philip Lowe raised the official discount rate (OCR) to 1.85%. This has resulted in an extreme liquidity squeeze in the Australian economy, leaving only expensive money in the hands of businesses. And they are forced to use it only in ultra-filtered investments.
At the same time, the US dollar index (DXY) resumed its advance after breaking away from the consolidation formed in a narrow range of 108.86-108.96 at the beginning of the European session. Looking ahead, investors are awaiting the release of U.S. PMI data. Market expectations are for the U.S. manufacturing PMI to come in at 51.5 versus 52.2 previously. On the other hand, the services PMI will rise significantly to 49.1 from 47.3.