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AUD/USD struggles to regain 0.7700 from weekly low as market braces for FOMC

  • AUD/USD consolidates recent losses from the lowest since June 04.
  • US Treasury yields paused two-day uptrend, Wall Street posted mild losses.
  • US PPI, Retail Sales came in mixed but signal escalating price pressure.
  • Fed eyed, Aussie/China data may offer intermediate clues.

AUD/USD wobbles around 0.7680-90, off a weekly low, as it begins the key Wednesday comprising the US Federal Open Market Committee (FOMC) meeting. Other than the pre-Fed caution, mixed data from the US and a light news feed also contribute to the pair’s latest sluggish performance.

All eyes on Fed…

With the US macros keep reflation fears on the table, market players firm up their calls for the Federal Reserve (Fed) officials to accept the price pressure woes as more than temporary and revise up the dot-plot, not to forget expecting hints of tapering. However, Chairman Jerome Powell & Company is known for smart play and hence everybody is keenly awaiting the key announcements, up for publishing in the US session.

That said, the recent US economics conveyed weaker-than-expected Retail Sales for May, -1.3% versus -0.8% expected. However, the US Producer Price Index (PPI) rose more than 6.3% forecast to 6.6% YoY. On the other hand, Australia’s Q1 House Price Index crossed 3.6% previous readouts to 7.5% YoY but the QoQ readings eased to 5.4% versus 5.5% market consensus and 3.0% prior.

It’s worth noting that the RBA minutes and fears of the escalating West versus China tussle also contributed to the AUD/USD weakness. The RBA minutes stepped back from highlighting the July meeting for the hints of monetary policy adjustments while also saying, “It would be premature to bring QE to an end.” China conveyed its dislike for the North Atlantic Treaty Organization (NATO) group whereas the US ship heads to the South China water.

Amid these plays, the US 10-year Treasury yields marked 1.2 basis points (bps) of a downside to 1.49%, the first in three days while the US equity benchmarks closed mildly offered by the end of Tuesday’s North American session.

Looking forward, nothing matters more than the Fed and hence the pre-FOMC trading lull could keep AUD/USD chained. However, Australia’s Westpac Leading Index and China’s Industrial Production, as well as Retail Sales, may offer intermediate moves to the pair traders.

Read: Fed Interest Rate Decision Preview: Chair Powell will determine market response

Technical analysis

AUD/USD extends Friday’s breakdown of 100-day SMA, near 0.7725, towards an ascending support line from April 01, around 0.7660. A bearish crossover between 50-day SMA and 21-day SMA joins downbeat oscillators to keep sellers hopeful.