China\u2019s RatingDog Services PMI edged down to 54.1 in June from 54.4 in May, while remaining consistent with a strong expansion signal above the 50.0 threshold on the 0\u2013100 scale. Services exports rose for a second month and grew at the fastest pace since October 2024. AUD\/USD was up 0.08% on the day at 0.6930, despite the softer China reading. In the day\u2019s currency scoreboard, the Australian Dollar gained 0.09% versus the US Dollar, rose 0.07% against the Euro and advanced 0.18% against the Japanese Yen; it was the strongest performer against the Yen.<\/p>\n\n
The PMI is compiled from surveys of senior executives across private-sector and state-owned firms and is tracked for implications for growth, trade and commodity channels tied to Australia, though it is not a direct input to RBA decisions. Technically, AUD\/USD stayed under the 20-day simple moving average and the 100-day moving average, with the Relative Strength Index (14) near 39. Resistance levels were flagged at 0.6975, then 0.7073 and 0.7105, while support was seen around 0.6847. The RBA\u2019s inflation target was cited at 2\u20133%, and iron ore exports at $118 billion a year based on 2021 data.<\/p>\n\n
We see the latest Chinese Services PMI data, while slightly lower, points to a robustly expanding services sector. This is the third-strongest reading in almost three years, which fundamentally supports the Australian dollar given China is Australia’s top trading partner. The expansion in services exports at the fastest pace since late 2024 further solidifies this positive view for us.<\/p>\n\n
Despite this encouraging fundamental backdrop, the AUD\/USD currency pair is showing technical weakness. The price is currently trading below its 20-day and 100-day moving averages, suggesting the near-term momentum is to the downside. We must therefore balance the positive economic news from China with this bearish chart formation in the coming weeks.<\/p>\n\n
To support our view, we note that iron ore prices, a key Australian export, have stabilized recently, trading around $115 per tonne after a volatile second quarter. Furthermore, with recent Australian inflation data for Q2 2026 coming in at 3.4%, the Reserve Bank of Australia is unlikely to signal any interest rate cuts soon. This backdrop provides a floor for the Aussie dollar, complicating the purely bearish technical picture.<\/p>\n\n
Given the conflict between fundamentals and technicals, we believe traders should consider using options to manage risk. Buying AUD\/USD put options with a strike price below the key support level of 0.6850 could be a prudent way to hedge against a downside break. This strategy would pay off if the bearish technical signals overwhelm the positive news from China.<\/p>\n\n
Alternatively, if the AUD\/USD manages to break above the initial resistance near 0.6975, it would indicate that the fundamental strength is taking over. In this scenario, we would look to purchase call options to capitalize on a potential move toward the 0.7073 level. This approach allows for capturing upside potential while defining risk.<\/p>\n\n
Historically, during periods of Chinese economic recovery like we saw in 2021, strong PMI data often preceded significant AUD strength. We anticipate volatility will rise as the market decides whether to follow the strong Chinese data or the weaker AUD\/USD technicals. The current strength in the AUD\/JPY cross, now at its highest since early 2015, also suggests that Aussie weakness is primarily concentrated against the US dollar for now.<\/p>\n\n\n\n