Australian Dollar losses steam at 0.7000 as PMIs signal a deceleration

The Australian Dollar experienced a decline of 0.17% against the US Dollar on Thursday as investors grew concerned about the valuation of US tech stocks, particularly in the wake of the AI sector's valuation concerns. Simultaneously, oil prices surged due to heightened tensions between the United States and Iran. The AUD/USD exchange rate currently stands at 0.7017.

Wall Street ended the day on a lower note, while US Treasury yields fell as investors moved funds from stocks to US Treasuries, weakening the US Dollar. The US Dollar Index (DXY) showed a 0.02% decrease, settling at 101.61. Escalating US-Iran tensions, with both countries preparing to resume attacks after the recent elections, contributed to the upward movement of oil prices, further supporting the US Dollar.

Meanwhile, the US initial jobless claims for the week ending on October 17 were lower than expected, coming in at 194K, which is a near 57-year low. However, the four-week average remains at 197.75K, indicating a resilient labor market. In Australia, the services sector contracted, and the services sector PMI fell from 51.9 to 47.5, while the manufacturing PMI only marginally improved from 49.6 to 49.7.

Jingyi Pan, an Economics Associate Director at S&P Global Market Intelligence, suggested that the recent downturn in business activity was attributed to higher prices and rising interest rates, which have dampened demand. Despite this, market participants had priced in a 57% probability that the Reserve Bank of Australia (RBA) would raise interest rates during their November meeting, as RBA Deputy Governor Hauser stated that "monetary policy is working, but the inflation outlook has worsened."

Looking ahead, the US economic calendar will feature the University of Michigan Consumer Sentiment ahead of the Federal Reserve's monetary policy decision next week and the release of the Core PCE on October 29. The daily chart for AUD/USD remains bearish, with the spot price trading just below key support levels and above clustered simple moving averages at 0.7076.

The Relative Strength Index (14) is slightly above 50, suggesting stabilizing momentum, but the price is still constrained by a nearby overhead resistance structure. If buyers can break through the 0.7070-0.7100 region decisively, rallies may gain traction. On the upside, the primary resistance is expected at the triple simple moving average around 0.7076 and the upward trend-line cap near 0.7095.

The main support lies at the rising trend line around 0.6918, followed by a broader ascending support zone from 0.6897 to 0.6833. Deeper support can be found at the 0.6673 handle and the old trend-line break area near 0.6356.