AUD/USD bulls approach 0.7000 amid Jackson Hole vibes, China-led optimism

• AUD/USD renews daily top as buyers poke 100-DMA for the third consecutive day.
• China announced one more stimulus to avoid looming recession.
• Softer US data, sluggish yields joined hopes of less hawkish central bank talks in Jackson Hole to favor buyers.
• Second-tier US data, risk catalysts are the key for fresh impulse.

AUD/USD rise half a percent as it dribbles around the intraday top of 0.6955 during Thursday’s Asian session. The Aussie pair’s latest gains could be attributed to the Chinese efforts to defend the world’s second-largest economy from slipping into recession, as well as expectations of witnessing less aggression of central bankers at the Jackson Hole Symposium.

On late Wednesday, China’s Cabinet, State Council, outlined a 19-point policy package while announcing economic stimulus measures worth CNY1 trillion ($146 billion) to stimulate growth affected by covid lockdowns and property market crisis, per Bloomberg.

Additionally, Li Zhong, Vice Minister of the Ministry of Human Resources and Social Security, said on Thursday that China will focus on expanding jobs and promote fiscal, monetary and industrial policies to support job market stabilization.

It should be noted, however, that global rating giant Fitch mentioned that the Chinese land market has yet to recover in a sustainable manner. On the same line could be the comments from Sara Johnson, Executive Director of Economic Research at S&P Global Market Intelligence, who said in a statement on Wednesday, that global growth is likely to remain subdued in late 2022 and 2023 while inflation is seen moderating over the next two years.

Considering the close trade ties between Australia and China, positive headlines from Beijing helps AUD/USD buyers.

Other than China headlines, mixed US data and recently sluggish US Treasury yields also underpin the Aussie pair’s upside momentum. That said, the US Durable Goods Order for July dropped to 0.0% versus 0.6% expected and an upwardly revised 2.2% previous reading. However, Nondefense Capital Goods Orders ex Aircraft rose past 0.3% market consensus to 0.4%, versus 0.9% prior. Further, Pending Home Sales improved to -1.0% MoM in July versus -4.0% expected and -8.9% prior (revised down from -8.6%). On a yearly basis, the Pending Home Sales decreased by 19.9%, versus the previous contraction of 20.0%.

Given the mixed US data and impending economic slowdown concerns, markets are hopeful that Fed Chair Jerome Powell might refrain from the hawkish stand during Friday’s speech. Even so, Fed funds futures traders are pricing in a 61% chance that the Fed will hike rates by another 75 basis points (bps) at its September meeting, and a 39% probability of a 50 basis points increase, per Reuters.

Against this backdrop, the market sentiment improved and exerted downside pressure on the US Dollar. That said, the US 10-year Treasury yields rose the most in a week the previous day while refreshing a two-month high to around 3.10%. However, mixed concerns seem to have probed the US bond sellers of late. Moving on, the Wall Street benchmarks printed mild gains, which in turn helped S&P 500 Futures to remain mildly bid at around 4,150 at the latest.

Moving on, the risk-on mood may help AUD/USD pair to remain firmer. However, the final readings of Germany’s second quarter (Q2) GDP and the second version of the US Q2 GDP will join the US Q2 Personal Consumption Expenditure (PCE) will direct intraday moves.

Technical analysis

Although a bounce from an upward sloping support line from June 14, around 0.6875 by the press time, favors short-term AUD/USD buyers, the 100-DMA level surrounding 0.6960 challenges the quote’s further advances.