AUD/USD bulls keep the reins above 0.6800 ahead of RBA’s Lowe, US NFP

• AUD/USD grinds at the highest levels in 11 weeks after refreshing the top.
• Dovish Fed, China-linked optimism and downbeat US data weighed on the US Dollar.
• Mixed performance of equities, Aussie data probed bulls ahead of the key catalysts.
• Likely dovish tone from RBA’s Lowe, softer US jobs report may favor bulls.

AUD/USD portrays the typical pre-data/event anxiety as it seesaws near 0.6800 during the early Asian session on Friday, after refreshing the 11-week high the previous day. That said, the Aussie pair rose during the last three consecutive days amid broad US Dollar weakness and the market’s optimism surrounding China’s Covid conditions, adding strength to the run-up could be the downbeat US data.

US Dollar Index (DXY) slumped to the lowest levels in four months, pressured around 104.70 by the press time, as the dovish bias of the Federal Reserve (Fed) policymakers, as well as downbeat comments from US Treasury Secretary Janet Yellen, raised hopes of easy rate hikes.

Recently, Federal Reserve (Fed) Governor Michelle Bowman stated that (It is) appropriate for us to slow the pace of increases. Before him, Fed Governor Jerome Powell also teased the slowing of a rate hike while US Treasury Secretary Yellen also advocated for a soft landing. Further, Vice Chair of supervision, Michael Barr, also said, “We may shift to a slower pace of rate increases at the next meeting.”  It’s worth noting that the recent comments from New York Fed’s John Williams seemed to have tested the US Dollar bears as the policymakers stated that the Fed has a ways to go with rate rises.

Not only the Fedspeak but the mostly downbeat US data also drowned the US Dollar. That said, the US Core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge, matched 5.0% market forecasts on YoY but eased to 0.2% MoM versus 0.3% expected. Further, US ISM Manufacturing PMI for November eased to 49.0 versus 49.7 expected and 50.2 prior.

Furthermore, the consecutive three days of the downtrend of Chinese daily Covid infections from the record high allowed the policymakers to tease the “next stage” in battling the virus while announcing multiple easing of the activity-control measures. Given the Aussie-China ties, positives for Beijing often get cheered by the AUD/USD buyers.

At home, Australia’s Private Capital Expenditure dropped to -0.6% for the third quarter (Q3) versus 1.5% expected and -0.3% prior. Further, downbeat prints of Australia’s AiG Performance of Mfg Index and S&P Global Manufacturing PMI for November also appeared to have probed the AUD/USD bulls at the multi-day high.

It should be observed that the mixed performance of Wall Street and multi-month low US Treasury yields seemed to also have probed the AUD/USD bulls ahead of a speech from Reserve Bank of Australia (RBA) Governor Philip Lowe. The policymaker has already teased easy rates during his speech earlier in the week and hence the bull’s fears are justified. Also challenging the prices could be the cautious mood ahead of the key US jobs report for November, the earlier signals for which have been downbeat and may favor the Aussie buyers if matching forecasts.

Also: Nonfarm Payrolls Preview: Dollar selling opportunity? Low expectations to trigger temporary bounce

Technical analysis

Although August month’s low near 0.6855 joins nearly overbought RSI to challenge the immediate AUD/USD upside, a clear break of the previous key resistance line from September 13, now support near 0.6765, directs the Aussie pair towards September’s peak of 0.6916.