AUD/USD floats above 0.6480 support ahead of Australia wage growth, RBA/FOMC Minutes

AUD/USD seesaws around 0.6500 amid early Monday morning in Australia, making rounds to the short-term key resistance surrounding 0.6480. That said, Aussie pair’s latest weakness could also be linked to the fears of firmer US Treasury bond yields and China concerns. Also important to watch are the concerns about the Reserve Bank of Australia (RBA) Monetary Policy Meeting Minutes, as well as the Fed Meeting Minutes. Further, the softer US Dollar ahead of the more clues for the United States inflation also weighs on the AUD/USD price.

That said, the US 10-year Treasury bond yields rose for the fourth consecutive week despite the initial retreat. With this, US Dollar managed to post a four-week uptrend in the last, backed by mostly upbeat US data and the market’s indecision.

Talking about the data, the US Consumer Price Index (CPI) numbers for July failed to lift the Fed bets for September, suggesting the nearness to the policy pivot. However, the CPI details and other price pressure measures managed to keep the Greenback buyers hopeful. It’s worth noting that the US Producer Price Index (PPI) for July, the preliminary readings of the University of Michigan’s (UoM) Consumer Sentiment Index (CSI) for August and the UoM 5-Year Consumer Inflation Expectations for the said month helped the USD benefit on Friday. Further, the US one-year inflation outlook edged lower to 3.3% from 3.4%.

That said, the US PPI improved to 0.3% MoM and 0.8% YoY for July versus 0.0% and 0.2% respective priors. That said, the Core PPI reprinted 2.4% yearly figures for the said month compared to 2.3% anticipated. Further, the preliminary readings of the Michigan Consumer Sentiment Index CSI edged lower to 71.2 for August versus 71.6 prior and 71.0 market forecasts. Additionally, UoM 5-year Consumer Inflation Expectations eased to 2.9% for August versus 3.0% expected and prior.

Elsewhere, Federal Reserve (Fed) Governor Michelle Bowman backed additional rate hikes and defended the Fed hawks. However, San Francisco Fed Bank President Mary Daly, Philadelphia Fed Bank President Patrick Harker and New York Fed President John Williams signaled rate cuts in 2024 but also highlighted data-dependency and kept the policy doves looking for more details to confirm the bias.

With this, the CME Group’s Fedwatch tool suggests that traders see less than a 10% chance that the US will raise interest rates in September.

It’s worth noting that China allows the local governments to use the provincial-level governments to raise about 1 trillion yuan ($139 billion) via bond sales to repay the debt of local-government financing vehicles (LGFV) and other off-balance sheet issuers, per Bloomberg. The news justifies the market’s confidence in the Chinese policymakers’ capacity to avoid recession and keep a tab on the US Dollar and prod the Gold sellers.

Alternatively, China’s trade surplus improved but downbeat inflation data signaled that the dragon nation’s economic recovery is in danger, which in turn exerted downside pressure on the commodities and Antipodeans, allowing the US Dollar to cheer its haven status and drown the Gold Price.

The fears of witnessing more geopolitical tussles between the West and China, mainly due to the US restriction on investment in China technology companies and the likely repeat of the measures by the UK and European Union, roiled the sentiment and inspired the Gold sellers. Previously, China Commerce Ministry unveiled measures to limit exports of some drones and drone-related equipment, starting from September 01, by citing “national security and interests”. The dragon nation also showed dislike for the US ban on investment in Chinese technology companies by citing the “right to retaliate”, which in turn allowed the XAU/USD bears to stay hopeful.

Not only the US-China fears but Russia’s firing of warning shots at a warship in the Black Sea, which in turn renews the geopolitical woes and exerts more pressure on the Gold Price.

Looking ahead, China’s Industrial Production and Retail Sales for July, up for publishing on Tuesday, will be crucial to watch for initial directions ahead of Wednesday’s housing numbers. Furthermore, Tuesday’s US Retail Sales for July and Wednesday’s Minutes of the latest Federal Open Market Committee (FOMC) monetary policy meeting will be crucial to watch for a better view.

It’s worth noting that the Aussie Wage Growth figures for the second quarter (Q2) of 2023 and the RBA Minutes will also be important to predict AUD/USD moves clearly.

Technical analysis

AUD/USD bears appear running out of steam as they approach an upward-sloping support line from November 10, 2022, around 0.6480 at the latest. The Aussie pair’s recovery, however, needs validation from the lows marked during late June and early July, close to 0.6600.