AUD/USD eases from 12-day-old resistance to 0.6500 ahead of Australia inflation, US GDP

• AUD/USD pares the biggest daily gains in three weeks, fades bounce off yearly low.
• Market sentiment sours again amid looming energy crisis in Europe, concerns over China’s economic health.
• Hawkish Fedspeak, rebound in yields add strength to the risk-off mood.
• Australia’s first ever monthly inflation data for July and August will be important considering RBA’s cautious mood.

AUD/USD consolidates the previous day’s rebound from the two-year low of around 0.6500 during Thursday’s Asian session. In doing so, the Aussie pair pares the biggest daily jump in three weeks amid the cautious mood ahead of the key data from Australia and the US.

After refreshing the yearly low, the risk-barometer pair rallied late Wednesday as the US dollar tracked a heavy slump in the Treasury yields to retreat from the two-decade top.

That said, the US Dollar Index (DXY) reversed from 114.78 to 113.00 after the Bank of England (BOE) announced surprise bond buying to restore the market’s confidence following the disappointment of the UK’s fiscal plan.

That said, the Bank of England (BOE) announced a bond-buying program to defend the British Pound (GBP) on Wednesday. The details suggest that the BOE will buy bonds with a maturity of over 20 years and up to 5 billion sterling worth per auction initially.

On the other hand, the US international trade deficit narrowed by $2.9 billion to $87.3 billion in August from $90.2 billion in July. Details suggest that the Exports dropped for the first time since January while Imports marked the fifth consecutive monthly decline. Further, Atlanta Fed President Raphael Bostic said on Wednesday that the baseline scenario right now includes a 75 basis points (bps) rate hike in November and a 50 bps increase in December, as reported by Reuters. Additionally, Chicago Federal Reserve President Charles Evans emphasized the need to address inflation and tried to renew the US dollar buying but could not due to the softer yields.

Amid these plays, the US 10-year Treasury bond yields slumped the most in six months and allowed equities to consolidate recent losses, dragging the US Dollar Index (DXY) from the multi-year high. It’s worth noting that the S&P 500 Futures print mild losses and fades bounce off a 21-month low of late.

While the risk-on mood favored the AUD/USD buyers the previous day, the prevailing energy crisis in Europe, doubts over the BOE’s capacity to regain traders’ confidence and current pessimism in China weigh on the pair.

Moving on, Australia’s first ever monthly inflation data for July and August will be crucial for the AUD/USD pair considering the latest cautious statements from the Reserve Bank of Australia (RBA). Should the outcome print softer details, the latest risk-aversion could join the firmer US dollar to recall the bears and attack the recently flashed yearly low.

The final readings of the US Q2 Gross Domestic Product (GDP), expected to confirm -0.6% annualized figure, will be crucial for the pair traders to watch.

Technical analysis

Although 78.6% Fibonacci Expansion (FE) of the AUD/USD pair’s April-August moves, around 0.6355 triggered the pair’s bounce, a clear upside break of the two-week-old resistance line, near 0.6530 at the latest, becomes necessary to defend the recovery.