AUD Edges Higher as US Business-Activity Data Falls Short

The Australian Dollar (AUD) has recovered some ground against the US Dollar (USD), trading near 0.6990 on Friday, after a mixed bag of US business-activity data.

The preliminary S&P Global Manufacturing Purchasing Managers Index (PMI) came in at 53.8 in July, below market expectations of 54.5, while the Services PMI climbed to 53.6 from 51.2, exceeding forecasts of 51.0.

Despite the strong services reading, which may keep US Treasury yields supported and limit the AUD's recovery, the manufacturing disappointment and broader USD consolidation have allowed AUD/USD to regain some ground.

The Federal Reserve (Fed) meeting on July 28-29 is expected to leave interest rates unchanged at 3.50%-3.75%, but Fed Chair Kevin Warsh's language on elevated inflation, resilient economic activity, and the impact of higher energy prices will be crucial in determining the direction of the USD.

Short-term technical analysis shows that AUD/USD holds above the longer-term 100-period Simple Moving Average (SMA) at 0.6964, but trades just under the 20-period SMA at 0.6993, highlighting a lack of directional conviction.