AUD/USD clings to mild gains around 0.6600 amid banking fears, anxiety ahead of US GDP

• AUD/USD struggles to extend recovery from six-week low amid indecisive markets ahead of the key US data.
• Mixed sentiment and Australia inflation clues also challenge momentum traders of the Aussie pair.
• Headlines surrounding US debt ceiling, First Republic Bank will join US Q1 GDP release to direct intraday AUD/USD moves.

AUD/USD remains mildly bid around 0.6610, defensive of late, as buyers struggle to extend the previous rebound from the 1.5-month low amid a cautious mood heading into Thursday’s European session. In doing so, the Aussie pair justifies mixed sentiment in the market, as well as mixed inflation clues at home, as traders await the US first quarter (Q1) Gross Domestic Product (GDP), expected to ease to 2.0% on an annualized basis versus 2.6% prior.

Earlier in the day, the Australian Bureau of Statistics (ABS) released the Q1 Export and Import Price Index figures and failed to ward off the dovish bias surrounding the Reserve Bank of Australia’s (RBA), amplified after the previous day’s softer Aussie Consumer Price Index (CPI) releases. That said, the Export Price Index rose to 1.6% QoQ in Q1 2023 from -0.9% prior but eased beneath the 1.9% forecasts whereas the Import Price Index slumped by -4.2% versus 3.6% market expectations and 1.8% prior.

Elsewhere, market sentiment remains dicey amid mixed feelings about the US default, banking sector health and the Q1 GDP.

Late on Wednesday, the US House of Representatives passed a bill that enables the government to negotiate the extension of the debt ceiling. However, the policymakers are likely to remain at loggerheads amid the wide difference between the Republicans' and Democrats’ demands. With this, the cautious optimism surrounding the US debt ceiling discussions keeps the Aussie pair firmer. Furthermore, the latest tax receipt numbers from the US allow Goldman Sachs (GS) to expect that the US Treasury Department can avoid the risk of a federal payments default till late July, which in turn puts a floor under the prices.

On a different page, upbeat earnings from Microsoft and Google’s parent Alphabet Inc. allowed Nasdaq to remain firmer. However, the escalating fears from the First Republic Bank (FRB), due to another 20% share price fall on Wednesday following a 50% slump the previous day, weigh on the sentiment.

It should be noted that comments from US Commerce Secretary Gina Raimondo renewed fears surrounding the US-China tussle. “Chinese cloud computing companies like Huawei Cloud and Alibaba Cloud could pose a threat to US security,’ Said US Commerce Secretary Raimondo per Reuters. The policymaker also vowed to review a request to add them to an export control list reported the news.

Against this backdrop, US Treasury bond yields remain directionless while the S&P 500 Futures print mild gains around 4,080 by the press time, following a mixed close of Wall Street.

Moving ahead, the US Q1 GDP numbers will be crucial for AUD/USD traders to watch for clear directions amid recession woes. Following that, Friday’s Core PCE Price Index details, the Fed’s preferred inflation gauge, could entertain traders ahead of the next week’s Federal Open Market Committee (FOMC).

Technical analysis

Sustained upside break of the seven-week-old previous support line, around 0.6655 by the press time, becomes necessary for the AUD/USD pair traders to push back the odds favoring a downside targeting the Year-To-Date (YTD) low, currently around 0.6565.