AUD/USD prods four-day uptrend near 0.6700 on mixed Aussie data, China news, Fed Minutes eyed
- AUD/USD struggles to extend four-day winning streak at the highest levels in a week.
- RBA paused rate hike trajectory but kept Aussie bulls hopeful with hawkish statements.
- Fears of ramping up US-China trade war challenge sentiment amid full markets, mid-tier Aussie data came in mixed.
- Risk catalysts, FOMC Minutes are the key for fresh impulse.
AUD/USD justifies risk-barometer status as it pauses the four-day winning streak while making rounds to 0.6690 amid the early hours of Wednesday’s Asian session. In doing so, the Aussie pair takes clues from the risk-negative headlines surrounding China and mixed data from home.
Australia’s AiG Manufacturing PMI slumps to -19.8 for May from -5.1 prior but Construction PMI improves to 10.6 versus -6.6 previous readings. Further, the AiG Industry Index also slide to -11.9 during the said month from -10.9 marked in April. That said, the S&P Global Composite PMI eased to 50.1 in June compared to 50.5 previous readings whereas the Services PMI also declined to 50.3 from 50.7 expected and prior.
Further, Fears of the US-China trade war escalate and weighs on the sentiment as China announced abrupt controls on exports of some gallium and germanium products, effective from August 1. The dragon nation’s latest retaliation is in reaction to the US curb on AI chips’ shipments to Beijing.
Previously, the Wall Street Journal (WSJ) added to the market’s fears about the Sino-American ties while saying, “The Biden administration is preparing to restrict Chinese companies’ access to U.S. cloud-computing services, according to people familiar with the situation, in a move that could further strain relations between the world’s economic superpowers.”
On the same line, China’s President Xi Jinping said in a virtual SCO summit on Tuesday that they “should focus on practical cooperation and accelerate economic recovery. The policymaker also added, “(They) Need to strengthen strategic communication and coordination, respect each other’s core interests and concerns.”
It should be observed that US Treasury Secretary Janet Yellen is in Beijing. Earlier on Tuesday, US Treasury Department said, per Reuters, “Treasury Secretary Janet Yellen had a ‘frank and productive’ discussion today with China’s Ambassador.” The news also mentioned that US Treasury Secretary Yellen raised issues of concern while also conveying the importance of the two countries working together.
On Tuesday, the Reserve Bank of Australia (RBA) surprised markets by keeping the benchmark rates unchanged at 4.10%, versus expectations of a third consecutive rate hike of 25 basis points. However, the Aussie central bank also said, “Some further tightening of monetary policy may be required,” while adding that any tightening will depend upon how the economy and inflation evolve.
AUD/USD initially fell in reaction to the RBA’s status quo before regaining the upside momentum that allowed the Aussie pair to portray a four-day winning streak, as well as refresh a one-week high.
Against this backdrop, the US Dollar printed a two-day winning streak before ending Tuesday’s North American session near 103.10 whereas the German Bunds rose while Euro Stoxx and FTSE 100 were both down with mild losses.
Looking ahead, the risk catalysts will be crucial to determine near-term market directions as the US traders return after a break. Also important to watch will be the Federal Open Market Committee (FOMC) Minutes for the June meeting when the Fed policymakers announced a pause on the rate hike. Additionally important will be China Caixin Services PMI for June.
Technical analysis
Although the 200-DMA challenges AUD/USD bulls around the 0.6700 round figure, pullback remains elusive unless breaking the previous resistance line stretched from June 16, close to 0.6585 at the latest.