AUD/USD: Corrective pullback fades around 0.6900, Taiwan, US inflation in focus

AUD/USD struggles to extend the week-start gains as the Aussie traders flirt with the 0.6900 threshold amid a risk-off mood during Monday’s Asian session. That said, the Sino-American tension over Taiwan joins recently hawkish bets over the Fed appear to challenge the pair buyers, due to its risk barometer status. However, recently firmer trade data from China appeared to have favored the Aussie pair.

While portraying the mood, the S&P 500 Futures drop 0.33% intraday while tracking Friday’s downbeat performance of Wall Street. The US 10-year Treasury yields also remain pressured around 2.827% after rising 14 basis points (bps) the previous day.

The risk-off mood gained major strength from Friday’s strong US employment report for July. That said, the headline Nonfarm Payrolls (NFP) rose to 528K versus 250K expected and 398K upwardly revised prior. Further, the Unemployment Rate also inched lower to 3.5% compared to 3.6% expected and previous readings.

Following the data, San Francisco Fed President Mary Daly said during the weekend that the Fed is far from done in combating inflation. The policymaker also added, “50 bps increase is definitely in play. We need to keep an open mind.”

Elsewhere, the escalation in the US-China tussles surrounding Taiwan keeps the traders on their toes while also supporting the US dollar’s safe-haven demand. Reuters came out with the news suggesting that China is up for ‘regular’ military drills east of the Taiwan Strait median line. That said, the dragon nation’s Foreign Ministry announced on Friday that they will sanction US House of Representative Speaker Nancy Pelosi over the Taiwan visit. On the other hand, Taiwan's Defense Ministry reported 66 Chinese aircraft conducting activities in the Taiwan Strait as of 5:00 PM local time on Sunday. Further, US Secretary of State Anthony Blinken mentioned that China's provocative actions were a significant escalation.

On the other hand, firmer trade numbers from China seem to challenge the AUD/USD bears. It should be observed that China’s trade numbers for June marked upbeat results with the Exports rising the most in the year. That said, the headline Trade Balance rose to $101.26B versus $90B forecasts and $97.94B. Further details suggest that Exports increased by 18% compared to 15% expected and 17.9% prior whereas the Imports eased to 2.3% compared to 3.7% expected and 1.0% prior.

Looking forward, inflation data is the key during this week as the US and China are up for publishing the latest price pressure numbers. The figures become more important after the US NFP-led hawkish bias for the Fed.

Technical analysis

AUD/USD seesaws between the 50-DMA and the 100-DMA, respectively around 0.6880 and 0.6960, while bearish MACD signals tease sellers.