AUD/USD sell-off stalls after upbeat China services PMI release

• Upbeat China services PMI number fails to lift the Aussie, courtesy of the narrowing AU-US 10Y bond yield spread

The post-Aussie retail sales sell-off in the AUD/USD appears to have run out of steam following the release of the upbeat October China serves PMI.

As of writing, the currency pair is trading at 0.7688 levels. The session low stands at 0.7684 levels. China’s Caixin October Services PMI came in at 51.2 vs. 50.6 last and 50.8 expectations. At 51.0 in October, the Composite Output Index fell from 51.4 in September to signal the weakest pace of expansion since June 2016.

Growth in the Chinese services activity did pickup up from September’s 21-month low, although the AU-US 10 year bond yield spread continues to slide; now hovering at 23.7 basis points (bps), the lowest level since early July. Consequently, the AUD is struggling to gather upside traction.

The AUD/USD may drop further in case the US wage growth numbers due at 18:00 GMT beat estimates.

AUD/USD Technical Levels

Jim Langlands from FX Charts writes-

" With both the neckline of the head/shoulder formation and the 200 DMA having now been broken, and with the short term momentum indicators looking a bit more positive, further gains could be in store and a move of 0.7740/50 would not really surprise although it may take a decent Services PMI form Australia/China to take us there.

On the downside, support will be seen at 0.7700 and then again at 0.7670, although this seems unlikely to be seen, at least until the US jobs data.

Look for a choppy session and then go with the flow after the NFP release, although the upside currently looks mildly flavored. A strong NFP number would quickly alter that theory I suspect, with the US$ likely to see a decent lift."