AUD/USD bulls attack 0.7000 despite mixed catalysts ahead of US PCE inflation

• AUD/USD remains firmer around the six-week high, recently grinding higher.
• Australia’s PPI came in mixed, IMF downgrades Aussie GDP forecasts.
• China ignores mentioning GDP target in Politburo communication but fears of recession test buyers.
• US PCE Inflation, updates over “technical recession” and second-tier US data will be important for fresh impulse.

AUD/USD reverses the previous day’s pullback from a 1.5-month top as it picks up bids to 0.7000 during Friday’s Asian session. In doing so, the Aussie pair justifies its risk-barometer status during the sluggish session.

Market sentiment improved recently after China avoided mentioning its Gross Domestic Product (GDP) target after the Politburo meeting. Also favoring the risk appetite and the AUD/USD prices are the recently receding odds favoring the Fed’s aggression.

Talking about the data, Australia’s second quarter (Q2) Producer Price Index (PPI) rose 1.4% on QoQ and 5.6% YoY versus the market forecasts of 0.8% and 3.8% in that order. Further, Australia’s Private Sector Credit improved to 0.9% MoM in June versus the 0.8% previous reading. It should be noted that the International Monetary Fund (IMF) revised Australia’s GDP forecasts and tried to tame the AUD/USD rebound but failed amid the recent cautious optimism.

Following Fed Chair Jerome Powell’s teasing of “neutral rates”, AUD/USD traders should have traced the Flash readings of the US Q2 GDP, which marked the “technical recession” by declining for the second consecutive time, to decline further. That said, the first estimations of the US Q2 GDP printed -0.9% Annualized figure versus 0.5% expected and -1.6% prior. Further, the US Initial Jobless Claims also rose more than expected by 253K, with 256K during the week ended on July 22.

Elsewhere, US policymakers, including Fed’s Powell and Treasury Secretary Janet Yellen, tried to shrug off the “technical recession” after the US Q2 GDP dropped for the second consecutive time and teased the concept. The same probes the central bankers pushing for more rate hikes to tame inflation. Furthermore, talks between US President Joe Biden and his Chinese Counterpart Xi Jinping also went mostly okay and exerted downside pressure on the greenback’s safe-haven demand.

Against this backdrop, S&P 500 Futures rise half a percent to seesaws near the highest levels since early June while the US 10-year Treasury yields seesaw around 2.67%, the lowest levels since early April.

Moving on, the initial readings of German and Eurozone GDP for the second quarter (Q2) of 2022 will be important ahead of the Fed’s preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index, for July.

Technical analysis

Unless declining back below the 50-DMA support around 0.6970, AUD/USD prices are likely to approach the mid-June swing high surrounding 0.7070.