AUD/USD pares losses above 0.6900 ahead of US PMI, Fed Chair Powell’s Testimony 2.0

• AUD/USD bounces off intraday low, stays around weekly bottom.
• Market sentiment dwindles amid confusion over Fed Powell’s testimony and recent fears surrounding recession.
• Aussie PMIs came in mixed for June but support the RBA’s hawkish bias.
• US preliminary PMIs for June, the second round of Powell’s testimony eyed for fresh impulse.

AUD/USD consolidates recent losses around the weekly low during Thursday’s Asian session. In doing so, the Aussie pair picks up bids from intraday bottom to 0.6920 by the press time.

The Aussie pair’s latest rebound could be linked to the US dollar’s retreat amid chatters surrounding no major deviation in the Fed’s monetary policy path versus already known. It’s worth noting that Aussie PMIs also put a floor under the AUD/USD prices earlier in the day.

Preliminary readings of Australia’s S&P Global PMIs for June came in mixed as the Manufacturing and Services PMIs rose past market forecasts and priors but the Composite PMI eased below the previous readouts. The Manufacturing PMI rose to 55.8 versus 54.7 expected and 55.7 prior whereas the S&P Global Services PMI rose past 49.1 market consensus to 52.6, versus 53.2 previous readings. It should be noted that the Composite PMI eased below 52.9 to 52.6 in June.

Elsewhere, US Dollar Index (DXY) fades bounce off the weekly low as sellers flirt with 104.10 of late. Federal Reserve (Fed) Chairman Jerome Powell’s justification for the recent rate hike, the biggest since 1994, managed to gain acceptance, at least during the first round of the Testimony on the bi-annual Monetary Policy Report. However, Powell’s rejection of the need for a heavy rate increase seemed to exert downside pressure on the greenback afterward.

Additionally, the latest weakness in commodity prices, especially the oil prices and recently downbeat US data could also be linked to the AUD/USD pair’s latest recovery. That said, WTI crude oil prices dropped 0.85% to $103.50, down for the second consecutive day around the lowest levels in six weeks. The black gold’s latest weakness could be linked to the bearish weekly inventory data from the American Petroleum Institute (API).  Furthermore, talks that US President Joe Biden will announce gas tax relief by the end of the week also weighed on the oil prices.

It’s worth observing that the latest US figures concerning housing and activities have been softer for May, which in turn eases the pressure on the Fed to tame inflation.

Alternatively, fears of higher US employment data for June, spread by Reuter’s piece, seem to challenge AUD/USD bulls. The news said, “An early look at the state of the US job market in June from payroll provider UKG suggests some strengthening, even as the Federal Reserve lifts interest rates sharply and economists raise alarms over the likelihood of a recession. On the same line is Reuters’ poll suggesting ECB’s rate hikes to 0.75% by the end of 2022, versus 0.0% at the latest.

Against this backdrop, S&P 500 Futures struggle for clear directions while US 10-year Treasury yields remain pressured around the weekly low, down 2.8 basis points to 3.13% by the press time.

Moving on, US S&P Global PMIs for June and the weekly Jobless Claims data will precede the second round of Fed Chair Jerome Powell’s Testimony will be important for the AUD/USD traders to determine short-term moves. However, major attention will be given to recession fears.

Technical analysis

AUD/USD remains sidelined between a six-week-old support line and a downward sloping resistance trend line from June 08, respectively near 0.6880 and 0.6955.