Ella 
AUD/USD lacked any apparent directional support on Friday, oscillating between marginally higher/lower throughout the Asian session. Meanwhile, AUD/USD remains below the 0.6500 psychological mark, showing little reaction to China’s macro data.
Business activity in China’s manufacturing sector returned to expansionary territory in August, defying expectations for a decline for the second month in a row, a survey sponsored by Caixin showed. The fact that the Caixin China Manufacturing Purchasing Managers’ Index (PMI) rose to 51.0 from 49.2 in July did little to ease concerns about worsening conditions in the world’s second-largest economy. This in turn failed to provide any significant boost to the Australian dollar (AUD) as a proxy for China, but a slight pullback in the US dollar (USD) provided support for AUD/USD.
Amid uncertainty about the Federal Reserve’s (Fed) future interest rate hike path, the U.S. dollar index (DXY), which tracks the U.S. dollar against a basket of currencies, has difficulty continuing its solid recovery from a two-week low the day before. The U.S. macro data ADP employment changes and the second quarter gross domestic product estimate released at the beginning of this week indicate that the resilience of the U.S. economy is beginning to weaken. Still, Thursday’s U.S. PCE price index data left the door open for the Fed to raise interest rates by 25 basis points before the end of the year.
In fact, the U.S. PCE price index rose to an annual rate of 3.3% in July from the previous reading of 3%. Separately, the core PCE price index, the Fed’s preferred inflation gauge, was at an annual rate of 4.2%, up slightly from June’s 4.1%. Other details in the report showed personal income rose 0.2% and personal spending rose 0.8% on a monthly basis, the strongest figures since January. However, dollar bulls prefer to wait and see ahead of the closely watched monthly U.S. employment data.
The well-known non-farm payrolls report will be released later in the North American morning session, which will have a key impact on the Fed’s policy outlook. This will therefore drive US dollar demand and provide some significant boost to the AUD/USD pair. That said, AUD/USD now looks set to close higher for the first time in the past six weeks as focus now shifts to next Tuesday’s Reserve Bank of Australia interest rate decision.
