AUD/USD looks to regain 0.6800 amid mixed China news, RBA vs. Fed play, US NFP eyed

AUD/USD treads water on a daily basis around 0.6760-70, despite recently picking up bids to pare the early losses heading into Monday’s European session. It’s worth noting that the Aussie pair marked the first weekly gain in three amid broad US Dollar weakness in the last week. That said, the recent positive headlines from China, after an initial disappointment, seem to help the Aussie pair of late.

After showing an initial disappointment from China’s downbeat growth forecasts, following the softer economic figures in decades, the AUD/USD pair buyers cheer the latest headlines from the National Development and Reform Commission of the People's Republic of China (NDRC). “Will further release the potential for consumption,” said NDRC while also adding that China's economy steadily improving, per Reuters.

Meanwhile, softer prints of Australia’s TD Securities Inflation for February, 6.3% YoY versus 6.4% prior, seemed to have also probed the Aussie pair buyers earlier in the day.

During the weekend, headlines from China’s annual session of the National People's Congress (NPC) appeared grim and weighed on the risk profile early Monday. The NPC expected a modest growth of 5.0%, versus market expectations of 6.0%, for the current year. Apart from the softer Gross Domestic Product (GDP) expectations, geopolitical concerns were also discussed and the same challenged AUD/USD buyers. “China should promote the peaceful development of cross-Strait relations and advance the process of China's "peaceful reunification", but also take resolute steps to oppose Taiwan independence,” said outgoing China Premier Li Keqiang.

Looking further back, softer prints of the US data and mixed Fed talks joined the US Treasury bond yields’ retreat from the multi-month high to recall the AUD/USD buyers, following a two-week losing streak.

US ISM Services PMI for February came in as 55.1 versus 54.5 market expectations and 55.2 market forecasts. Previously in that week, the US Durable Goods Orders for January eased while the Conference Board’s (CB) Consumer Confidence also flashed mostly downbeat details.

Talking about the Fed talks, Federal Reserve Bank of Atlanta President Raphael Bostic renewed concerns about the Fed’s policy pivot as the decision-maker said, “The central bank could be in a position to pause the current tightening cycle by mid to late summer.”  However, San Francisco Federal Reserve Bank President Mary Daly said during the weekend that if data on inflation and the labor market continues to come in hotter than expected, interest rates will need to go higher, and stay there longer, than Fed policymakers projected in December, as reported by Reuters. On the same line, US Federal Reserve published a semi-annual Monetary Policy Report on Friday wherein it clearly said, “Ongoing increases in the Fed funds rate target are necessary.” The report also stated that the Fed is strongly committed to getting inflation back to 2%.

Amid these plays, the US 10-year Treasury bond yields, rose to the highest levels since November 2022 in the last week before easing to 3.95% by the end of Friday, making rounds to the same level at the latest. More importantly, the US two-year bond coupons rose to the highest levels last seen in 2008 before retreating to 4.85% by the press time. That said, the S&P 500 Futures print mild gains, tracking Wall Street’s moves amid a light sluggish start to the key week.

Looking ahead, the money policy meeting of the Reserve Bank of Australia (RBA), China’s inflation data and Fed Chair Jerome Powell’s Testimony will be important to watch for the AUD/USD pair traders ahead of Friday’s US jobs report for February.

Given the RBA’s receding hawkish bias, coupled with the fresh chatters surrounding Fed’s policy pivot, the AUD/USD pair may witness further grinding amid a lack of clear directions.

Technical analysis

AUD/USD recovery needs to cross the 50-EMA hurdle near 0.6775 to convince intraday buyers.