AUD/USD climbs on soft US data

The AUD/USD advances towards solid resistance around the 0.6970-90 area. Weak US economic activity and manufacturing data reported on Monday increase the chances of a US recession.

The AUD/USD climbs during the North American session but faces solid resistance around the 50-day EMA around 0.6971, amidst an upbeat market mood, with US equities rising, except for the Nasdaq, down 0.44%. Softer US economic data further reinforces the recession scenario as the Fed tries to tame 40-year high inflation by hiking rates aggressively and is widely expected to lift the Federal funds rate (FFR) to 2.50% on Wednesday.

The AUD/USD is trading at 0.6959 after opening near the 0.6920 area. During the Asian session, the major tumbled to the daily low of 0.6878, but buying pressure overcame sellers and lifted the pair to the daily high around 0.6965, also shy of the confluence of the R1 pivot point and the 50-day EMA.

Earlier in the New York session, the Chicago Fed revealed its National Activity Index for June, which tumbled to -0.19 MoM, unchanged from the May reading. However, it’s worth noticing that the 3-month moving average shifted negatively for the first time, indicating deterioration. Late during the day, the Dallas Fed Manufacturing Index plummeted to -22.6 from -12.5 estimated in July.

Meanwhile, an absent Australian economic docket left traders adrift to market sentiment and US economic data. AUD/USD traders will get some cues from Australia’s Q2 inflation report, which is expected to rise by 6.3%, to its highest since 1990.