Downtrend Continues; PMI Slips

Friday saw AUD/USD finish a handful of pips lower but off worst levels, the pair fell as low as 0.7106, the lowest since November 3 2020, before recovering. Last up 7 pips at 0.7139.

• Data showed IHS Markit Australia August flash manufacturing PMI 51.7 from 56.9 in July, services PMI fell to 43.3 from 44.2. Activity remained heavily impacted by current mobility restrictions brought about by the spread of the COVID-19 Delta variant.
• The weekend saw Australian PM Morrison note that the focus needs to move from COVID case numbers to hospitalisation rates. This came after NSW racked up another fresh record in terms of the daily COVID new case count and after the entire state of Victoria entered lockdown.
• CBA remains negative on AUD: "A temporary fall below 0.70 has remained our view since early July. AUD declined by over 3% last week. The weights on AUD are building. Global growth concerns and lower commodity prices are the latest additions to the list. Other weights include the negative Australia‑US 10‑year bond spread, slowing Chinese economic momentum and the risk the RBA delays tapering asset purchases."
• From a technical perspective AUD/USD traded to fresh trend lows once again Friday as bearish conditions strengthened. The breach of 0.7290 last week confirmed an extension of the bearish price sequence of lower lows and lower highs, reinforcing the current downward cycle. Price has also cleared 0.7200 and this opens 0.7053 further out, a Fibonacci retracement. Initial firm resistance is at 0.7290, low Jul 21.
• There are no further economic releases on the docket today, markets look ahead to a speech from RBA's Connolly on Wednesday this week while retail sales will be published on Friday.