AUD/USD dribbles near 0.6800 after Fed-induced volatility near multi-day top, focus on Australia employment

• AUD/USD steadies at the highest level since February after a volatile Wednesday.
• Fed’s hawkish halt prods Aussie bulls ahead of a slew of Aussie/China data, RBA Bulletin.
• Sentiment dwindles as FOMC favors July rate hike, backs “meeting by meeting” approach for decision-making and revised up economic forecasts.
• Australia Consumer Inflation Expectations, employment numbers and RBA Bulleting will precede China data dump to entertain Aussie traders.

AUD/USD makes rounds to 0.6800 as it portrays the Aussie pair trader’s anxiety ahead of multiple top-tier data releases from Australia and China during early Thursday. That said, the risk-barometer pair witnessed a volatile day on the Federal Reserve (Fed) announcements as it initially rose to the highest levels since February before retreating from 0.6835 amid hawkish signals from the US central bank.

Federal Open Market Committee (FOMC) decided to keep the benchmark Fed rate unchanged in the range of 5.0-5.25%, matching market expectations of pausing the 1.5-year-old rate hike cycle that propelled rates for 10 consecutive times. Even so, the hawkish signals from the FOMC Economic Projections and Fed Chair Powell’s speech underpin bullish bias about the US central bank.

That said, the dot plot rose 30 bps from March for 2024 and 2025 to 4.6% and 3.4% respectively while the median rate forecasts suggest two more rate increases in 2023. Further, no rate cuts nor recession is expected in the current year whereas the median estimation for the US Gross Domestic Product (GDP) rose to 1.0% from 0.4% in March. Additionally, Powell’s speech unveils a “meeting by meeting” approach for decision-making but signals July as a ‘live’ meeting, suggesting a 0.25% rate hike.

On Wednesday, there were no major data releases from Australia but optimism ahead of the Fed underpinned the AUD/USD pair’s bullish bias. That said, the US Producer Price Index (PPI) for May dropped to 1.1% YoY versus 1.5% expected and 2.6% prior

While portraying the market mood, Wall Street closed mixed whereas the US 10-year Treasury bond yield eased 1.0 basis point (bps) to 3.79% but its two-year counterpart grinds higher at the three-month top to 4.70%.

Looking forward, Australia’s Consumer Inflation Expectations for June will be the first data to direct the AUD/USD pair amid receding hawkish hopes from the Reserve Bank of Australia (RBA). Following that, May’s Aussie job numbers and RBA Bulleting for the first quarter (Q1) of 2023 can entertain the pair traders. Also important to watch will be China’s Retail Sales and Industrial Production for May, especially amid fears of easing economic recovery in Australia’s key customer.

Also read: Australian Employment Preview: Can the Aussie handle a slowdown in job creation?

Technical analysis

Failure to provide a daily closing beyond May’s high of 0.6818 joins nearly overbought RSI (14) to challenge AUD/USD buyers.