Australian dollar gains as manufacturing and service PMIs improve
US stocks ended the day higher as investors remained optimistic about the recovery of the US economy even as the number of coronavirus infections rises. The Dow Jones rose by 153 points while the Nasdaq rose by 110 points. Meanwhile, in Asia, the main indices were positive after the White House clarified a claim by Peter Navarro. In an interview with Fox News, he had said the China deal that was signed in January was over. In Japan, the Nikkei 225 and Hang Seng rose by 247 and 220 points, respectively.
The Australian dollar rose slightly after positive manufacturing and services PMI numbers. According to Markit, the manufacturing PMI rose from the previous 44.0 to 49.8 in May as companies restarted their operations. Similarly, the services PMI rose from the previous 26.9 to 53.2. A PMI reading of 50 and above is usually a sign that the economy is expanding. Meanwhile, in Japan, the important manufacturing sector showed signs of weakness. The PMI dropped from the previous 38.4 to 37.8, in a sign that the economy is not doing well.
Later today, Markit and its partnering organizations will release the flash manufacturing numbers from most countries. Analysts expect the eurozone manufacturing and services PMI number to increase to 44.5 and 41.0 respectively. In Germany, they expect that the PMI will increase from the previous 36.6 to 41.5. Other important PMI numbers to watch will be from the UK, US, and France. In addition to the PMI numbers, we will also receive the new home sales numbers from the US. Analysts expect that the sales will rise from the previous 623k to 640k.
The EUR/USD pair moved above a key resistance level in overnight trading. It is now trading at 1.1270, which is above the descending trendline shown in white below. It is also along with the 50-day and 100-day exponential moving averages while the signal line of the MACD has made a bullish crossover. It is also slightly above the 23.6% Fibonacci retracement level. Therefore, it seems the pair has completed its corrective wave, which means that it might continue the previous upward trend.
The AUD/USD pair rose slightly after Markit released the PMI data. It is trading at 0.6910, which is slightly higher than the day’s low of 0.6860. On the four-hour chart, the price is slightly above the 100-day and 50-day exponential moving averages while the RSI has moved to the neutral level of 55. The price is also slightly below the right shoulder of the previous head and shoulder pattern. Still, at this point, the pair could move in either direction.
The XBR/USD pair is trading at 42.84, which is a few points below the important resistance level at 43.26. On the four-hour chart, the price is above the 50-day and 100-day exponential moving averages while the RSI has moved closer to the overbought level of 70. A move above this resistance level will see bulls attempt to target the next important level at 45.0.