AUD/USD climbs above 0.7350 ahead of US PMI data

• AUD/USD is edging higher at the start of the week.
• US Dollar Index stays below 92.00 following Friday's rebound.
• Focus shifts to Markit and ISM Manufacturing PMI data from US.

The AUD/USD pair lost its traction on Friday and ended up closing the week flat. After staying relatively quiet during the Asian trading hours on Monday, the pair started to edge higher supported by the upbeat market mood. As of writing, AUD/USD was up 0.2% on the day at 0.7358.

Earlier in the day, the data from Australia showed that the AiG Performance of Manufacturing Index declined to 60.8 in July from 63.2 in June while the Commonwealth Bank Manufacturing PMI fell to 56.9 from 58.6. Additionally, the ANZ Job Advertisements contracted by 0.5% after rising by 1.5% in June.

USD weakens modestly ahead of PMI data

The mixed macroeconomic data releases failed to trigger a noticeable market reaction but the positive shift witnessed in market sentiment helped the AUD find demand during the European session. Currently, the S&P Futures and the Nasdaq Futures both gain more than 0.3% and the US Dollar Index is posting small daily losses at 91.96.

Later in the session, the ISM will release the US Manufacturing PMI report for July. The headline PMI is expected to arrive at 60.9. However, investors will pay close attention to the Prices Paid component of the survey and a stronger-than-expected reading could provide a boost to the USD in the second half of the day and vice versa.

On Tuesday, the Reserve Bank of Australia will announce its monetary policy decisions.

Previewing this event, "following the RBA’s meeting in July, we have affirmed our view that the conditions for rate hikes are unlikely to be met until at least late 2023," said UOB Group economist Lee Sure Ann. "Meanwhile, we expect its QE program to be extended again in November, with a further reduction in the pace of purchases likely."

Technical levels to watch for