Domestic Data Eyed

A round trip session saw AUD/USD attempt a challenge of 0.7780, before receding to as low as 0.7742 before making its way back to neutral levels as the US session came to a close. The pair last changes hands at 0.7767, around 3 pips higher on the session.

• Data earlier in the session from Markit showed flash Services PMI fell to 55.8 from 57.0 in December, while Manufacturing PMI surged to 57.2 from 55.7. "The Australian private sector remained resilient at the start of the year, despite the COVID-19 pandemic, with the flash PMI showing sustained growth of new orders, output and employment. Companies suggested that sales were supported by pent-up demand, particularly in the manufacturing industry," said Pollyanna De Lima, Economics Associate Director at IHS Markit.
• "While this boost in demand is welcome, inflationary pressures seem to be mounting. Manufacturers saw the sharpest increase in their cost burdens since data collection started in 2016. Material shortages and restricted freight capacity remained key themes of the survey."
• AUDUSD is firmer but continues to trade below the recent high of 0.7820 from Jan 6. Recent price action has defined key directional parameters at 0.7820, the Jan 6 high and 0.7659, the Jan 18 low. The uptrend remains intact. A break higher would confirm a resumption of the underlying uptrend and pave the way for strength towards 0.7885. On the downside, clearance of 0.7659 would instead signal the start of a possible corrective pullback.
• Markets will look ahead to domestic Retail Sales due at 0030GMT/1130AEDT. In a note CBA says they expect a sharp drop in December spending. "While we are forecasting a 7% fall in retail spending in December 2020, it would still leave retail trade up 6.2%/yr." Consensus is for a 1.5% drop.