Australian Dollar Extends Gains on Strong Economic Data

The Australian Dollar (AUD) continued its rise for the second consecutive day on Wednesday, driven by stronger-than-expected economic data.

Key highlights include:

• Retail Sales: Australia's Retail Sales increased by 0.6% in May compared to April, significantly higher than the forecasted 0.2% rise and the previous month's 0.1% gain.
• Purchasing Managers Index (PMI): Judo Bank's Australia Services PMI showed a slight improvement in June, rising to 51.2 from 51.0 in May. The Composite PMI also edged up to 50.7 from 50.6.

The Australian Dollar's appreciation was further supported by a weaker US Dollar. The decline in US Treasury yields contributed to the USD's weakness. Traders are now looking ahead to the US ADP Employment Change, ISM Services PMI for June, and the FOMC Minutes for further direction.

Fed Chair Jerome Powell reiterated the need for more evidence before considering interest rate cuts, despite acknowledging that the US economy is returning to a disinflationary path. This dovish stance also weighed on the US Dollar.

In Australia, the Reserve Bank of Australia's (RBA) June meeting minutes revealed a preference for holding interest rates steady due to inflation concerns. The RBA's Index of Commodity Prices fell by 4.1% year-on-year in June, the smallest decrease in 16 months. Additionally, the Melbourne Institute's Monthly Inflation Gauge showed a 0.3% rise in June, consistent with May, increasing speculation of a potential rate hike in August.

China's economic performance also influenced the AUD, with the Services PMI falling from 54.0 in May to 51.2 in June, below expectations. Any significant economic policy shifts by the People's Bank of China (PBOC) could impact the Australian Dollar due to close trade ties between the two countries.

Technically, the AUD/USD pair traded around 0.6670, with potential to test higher resistance levels at 0.6680 and 0.6700. Support levels are seen at 0.6630 and the 50-day Exponential Moving Average at 0.6625.