September 01, 2022 01:39 AM ET
By: AnalysisWatch
AUD/USD has seen decent buying interest below 0.6800 in the early European session. The asset is trying to break above its previous high volume area, which is in a narrow range of 0.6805-0.6822. On a broader note, the pair has seen a perpendicular move lower after giving up immediate support at 0.6840.
The pair attracted bids despite the release of the Caixin Manufacturing PMI. The economic data was cut to 49.5 from the consensus of 50.2 and the previous release of 50.4. The Chinese economy is facing the headwinds of a resurgent COVID-19, and the Chinese administration's lockdown measures have raised recession fears.
It is worth noting that Australia is a major trading partner of China, and sluggish Chinese economic activity could put significant pressure on the Australian dollar.
Meanwhile, the U.S. Dollar Index (DXY) is showing signs of exhaustion as the asset has failed to hold above 109.10. However, the upside remains favored as the Federal Reserve (Fed) looks to raise interest rates in September to stabilize prices. In today's session, the release of the U.S. ISM Manufacturing PMI is of significant importance. August manufacturing activity is expected to drop to 52.0 from 52.8 previously.
On the Aussie front, investors are awaiting the announcement of the interest rate decision by the Reserve Bank of Australia (RBA), which is expected next week. RBA Governor Philip Lowe is expected to announce a fourth consecutive 50 basis point (bp) increase in the official discount rate (OCR).