AUD/USD: Looks to regain 0.7800 ahead of RBA’s Lowe, China data dump

Following a week-start gap-down to 0.7751, AUD/USD takes rounds to 0.7750, picking up bids off-late, during the early Monday morning in Asia. In doing so, the aussie pair extends Friday’s downbeat performance, mainly due to the US dollar strength, ahead of a speech from RBA Governor Philip Lowe as well as China’s February month Retail Sales and Industrial Production.

New week, old songs?

AUD/USD traders eye fresh direction from RBA’s Lowe to trim the latest bearish bias while also anticipating China, Australia’s largest customer, to print welcome numbers. However, major attention is given to the Treasury yields that keep singing the old songs of reflation and suggests dialing back to the easy money policies earlier than planned.

During the last week, US 10-year Treasury yields refreshed 13-month top while rising for the sixth consecutive week as traders cheered US President Joe Biden’s $1.9 trillion stimulus as well as hopes of faster vaccinations and economic recovery. The same helped the US dollar index (DXY) to rise to the late November levels before stepping back from 92.50 and closing in red before this week’s key Fed meeting.

Even so, DXY bounced off a one-week low on Friday to snap the previous three-day losing streak as the upbeat US economics joined rallying US 10-year Treasury yield. In a reaction, the AUD/USD prices dropped on a daily closing basis but managed to trim losses as equities remained upbeat.

At home, RBA seems to calibrate its bullish bias but hesitates to openly admit the odds of earlier scaling back of the easy money policies. Although the same should have helped the AUD/USD bulls, fears of liquidity crunch in equities and the US dollar strength weigh on the quote. Additionally, the recently grown fears of fresh US-China tussle and Canberra’s dislike for Beijing’s move to redefine Hong Kong politics exert additional downside pressure on the quote.

On the contrary, AstraZeneca rejected claims of blood clots due to the usage of its vaccines whereas Novavax’s update to tame the UK covid variants also favors the risks.

Looking forward, RBA’s Lowe is to speak at Melbourne Business School’s online conference and may reiterate his cautious optimism, likely giving no major push to the AUD/USD prices. However, economics from China are likely to flash upbeat figures for February and may recall the bulls targeting 0.7800.

Technical analysis

A clear break above the two-week-old resistance line, now support, favors AUD/USD bulls to battle 21-day SMA, at 0.7785 now. However, January’s top and monthly high, respectively around 0.7820 and 0.7835, test immediate upside.