PMI Drops; RBA Awaited

A weaker greenback saw AUD/USD rise on Friday, the pair picking up from the lowest levels since September 2020 to hit intraday highs of 0.7533. The pair last trading down 2 pips at 0.7524.

• Weekend developments surrounding the COVID picture in Sydney have been positive, although authorities clearly remain cautious. Australia's track record of limiting the impact of the relatively limited local COVID outbreaks via short, sharp lockdowns looks set to remain intact.
• Data from IHS Markit showed June services PMI fell to 56.7 from 58 in May, but up from the 56.1 in the preliminary reading. The survey found that business activity and demand growth slowed with Victoria lockdown, but outprices saw the sharpest rise on record and employment outlook remains positive.
• From a technical perspective AUD/USD slipped further below support at 0.7476, Jun 21 low. The outlook is bearish as the price sequence of lower lows and lower highs extends. Price is also back below the 200-dma. The move in June through 0.7532, Apr 1 low confirmed a resumption of the reversal that occurred Feb 25 and this also highlights a bearish theme. The focus is on 0.7385, a bear channel base drawn off the Feb 25 high. Firm resistance is at 0.7617, the Jun 25 high.
• Retail sales, ANZ job ads and building approvals data headline the local docket on Monday. However, the proximity to Tuesday's key RBA decision should temper the impact of these releases.